Correlation Between Merchants Marine and Harbor Bankshares

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

By analyzing existing cross correlation between Merchants Marine Bancorp and Harbor Bankshares, you can compare the effects of market volatilities on Merchants Marine and Harbor Bankshares 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 Merchants Marine with a short position of Harbor Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Marine and Harbor Bankshares.

Diversification Opportunities for Merchants Marine and Harbor Bankshares

-0.29

Correlation Coefficient

Merchants Marine  Harbor Bankshares

Very good diversification

The 3 months correlation between Merchants and Harbor is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Marine Bancorp and Harbor Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Bankshares and Merchants Marine 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 Merchants Marine Bancorp are associated (or correlated) with Harbor Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Bankshares has no effect on the direction of Merchants Marine i.e., Merchants Marine and Harbor Bankshares go up and down completely randomly.

Pair Corralation between Merchants Marine and Harbor Bankshares

Given the investment horizon of 90 days Merchants Marine is expected to generate 5.32 times less return on investment than Harbor Bankshares. But when comparing it to its historical volatility, Merchants Marine Bancorp is 1.55 times less risky than Harbor Bankshares. It trades about 0.01 of its potential returns per unit of risk. Harbor Bankshares is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,350  in Harbor Bankshares on August 30, 2024 and sell it today you would earn a total of  50.00  from holding Harbor Bankshares or generate 3.7% return on investment over 90 days.

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

Merchants Marine Bancorp  vs.  Harbor Bankshares

Merchants Marine Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merchants Marine Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Merchants Marine is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Harbor Bankshares

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Bankshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Harbor Bankshares is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Merchants Marine and Harbor Bankshares

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

The idea behind Merchants Marine Bancorp and Harbor Bankshares 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.