Correlation Between First Merchants and Tytan Holdings

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

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

Diversification Opportunities for First Merchants and Tytan Holdings

-0.66

Correlation Coefficient

First Merchants  Tytan Holdings

Excellent diversification

The 3 months correlation between First and Tytan is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Tytan Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tytan Holdings 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 Tytan Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tytan Holdings has no effect on the direction of First Merchants i.e., First Merchants and Tytan Holdings go up and down completely randomly.

Pair Corralation between First Merchants and Tytan Holdings

Given the investment horizon of 90 days First Merchants is expected to generate 41.75 times less return on investment than Tytan Holdings. But when comparing it to its historical volatility, First Merchants is 39.6 times less risky than Tytan Holdings. It trades about 0.09 of its potential returns per unit of risk. Tytan Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.40  in Tytan Holdings on September 29, 2024 and sell it today you would lose (0.38) from holding Tytan Holdings or give up 95.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

First Merchants  vs.  Tytan Holdings

First Merchants

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 5 (%) 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.

Tytan Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tytan Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with First Merchants and Tytan Holdings

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

The idea behind First Merchants and Tytan Holdings 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.