Correlation Between First Merchants and Elliott Opportunity

Can any of the company-specific risk be diversified away by investing in both First Merchants and Elliott Opportunity at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Merchants and Elliott Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Merchants and Elliott Opportunity II, you can compare the effects of market volatilities on First Merchants and Elliott Opportunity and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Merchants with a short position of Elliott Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Elliott Opportunity.

Diversification Opportunities for First Merchants and Elliott Opportunity

0.78

Correlation Coefficient

First Merchants  Elliott Opportunity

Poor diversification

The 3 months correlation between First and Elliott is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Elliott Opportunity II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elliott Opportunity and First Merchants is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Merchants are associated (or correlated) with Elliott Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elliott Opportunity has no effect on the direction of First Merchants i.e., First Merchants and Elliott Opportunity go up and down completely randomly.

Pair Corralation between First Merchants and Elliott Opportunity

If you would invest  3,690  in First Merchants on September 28, 2024 and sell it today you would earn a total of  413.00  from holding First Merchants or generate 11.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.61%
Values	Daily Returns

First Merchants  vs.  Elliott Opportunity II

First Merchants

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, First Merchants exhibited solid returns over the last few months and may actually be approaching a breakup point.

Elliott Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elliott Opportunity II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Elliott Opportunity is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Merchants and Elliott Opportunity

The main advantage of trading using opposite First Merchants and Elliott Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, Elliott Opportunity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Elliott Opportunity will offset losses from the drop in Elliott Opportunity's long position.

The idea behind First Merchants and Elliott Opportunity II pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..