Correlation Between First Merchants and Jaws Hurricane

Can any of the company-specific risk be diversified away by investing in both First Merchants and Jaws Hurricane 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 Jaws Hurricane into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Merchants and Jaws Hurricane Acquisition, you can compare the effects of market volatilities on First Merchants and Jaws Hurricane 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 Jaws Hurricane. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Jaws Hurricane.

Diversification Opportunities for First Merchants and Jaws Hurricane

-0.59

Correlation Coefficient

First Merchants  Jaws Hurricane

Excellent diversification

The 3 months correlation between First and Jaws is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Jaws Hurricane Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jaws Hurricane Acqui 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 Jaws Hurricane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jaws Hurricane Acqui has no effect on the direction of First Merchants i.e., First Merchants and Jaws Hurricane go up and down completely randomly.

Pair Corralation between First Merchants and Jaws Hurricane

Given the investment horizon of 90 days First Merchants is expected to generate 25.3 times less return on investment than Jaws Hurricane. But when comparing it to its historical volatility, First Merchants is 13.64 times less risky than Jaws Hurricane. It trades about 0.02 of its potential returns per unit of risk. Jaws Hurricane Acquisition is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Jaws Hurricane Acquisition on September 22, 2024 and sell it today you would lose (15.90) from holding Jaws Hurricane Acquisition or give up 99.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	18.15%
Values	Daily Returns

First Merchants  vs.  Jaws Hurricane Acquisition

First Merchants

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, First Merchants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jaws Hurricane Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Merchants and Jaws Hurricane

The main advantage of trading using opposite First Merchants and Jaws Hurricane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, Jaws Hurricane 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 Jaws Hurricane will offset losses from the drop in Jaws Hurricane's long position.

The idea behind First Merchants and Jaws Hurricane Acquisition 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .