Correlation Between Meridian Bancorp and Merchants Bancorp

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

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

Diversification Opportunities for Meridian Bancorp and Merchants Bancorp

0.0

Correlation Coefficient

Meridian Bancorp  Merchants Bancorp

Pay attention - limited upside

The 3 months correlation between Meridian and Merchants is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Meridian Bancorp and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Meridian Bancorp 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 Meridian Bancorp are associated (or correlated) with Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Meridian Bancorp i.e., Meridian Bancorp and Merchants Bancorp go up and down completely randomly.

Pair Corralation between Meridian Bancorp and Merchants Bancorp

If you would invest  2,414  in Merchants Bancorp on January 19, 2024 and sell it today you would earn a total of  1,428  from holding Merchants Bancorp or generate 59.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Meridian Bancorp  vs.  Merchants Bancorp

Meridian Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Merchants Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merchants Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Meridian Bancorp and Merchants Bancorp

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

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