Correlation Between First Merchants and SVB T

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

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

Diversification Opportunities for First Merchants and SVB T

0.47

Correlation Coefficient

First Merchants  SVB T

Very weak diversification

The 3 months correlation between First and SVB is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and SVB T Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SVB T Corp 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 SVB T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SVB T Corp has no effect on the direction of First Merchants i.e., First Merchants and SVB T go up and down completely randomly.

Pair Corralation between First Merchants and SVB T

Assuming the 90 days horizon First Merchants is expected to generate 1.48 times less return on investment than SVB T. In addition to that, First Merchants is 1.63 times more volatile than SVB T Corp. It trades about 0.14 of its total potential returns per unit of risk. SVB T Corp is currently generating about 0.33 per unit of volatility. If you would invest  4,085  in SVB T Corp on August 30, 2024 and sell it today you would earn a total of  140.00  from holding SVB T Corp or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

First Merchants  vs.  SVB T Corp

First Merchants

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, First Merchants is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

SVB T Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SVB T Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, SVB T is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Merchants and SVB T

The main advantage of trading using opposite First Merchants and SVB T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants position performs unexpectedly, SVB T 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 SVB T will offset losses from the drop in SVB T's long position.

The idea behind First Merchants and SVB T Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.