Correlation Between Independent and Merchants Bancorp

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

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

Diversification Opportunities for Independent and Merchants Bancorp

0.91
  Correlation Coefficient
Independent Bk Corp
Merchants Bancorp

Almost no diversification

The 3 months correlation between Independent and Merchants is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bk Corp and Merchants Bancorp in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Independent 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 Independent Bk Corp 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 Independent i.e., Independent and Merchants Bancorp go up and down completely randomly.

Pair Corralation between Independent and Merchants Bancorp

Given the investment horizon of 90 days Independent is expected to generate 5.3 times less return on investment than Merchants Bancorp. In addition to that, Independent is 1.06 times more volatile than Merchants Bancorp. It trades about 0.03 of its total potential returns per unit of risk. Merchants Bancorp is currently generating about 0.14 per unit of volatility. If you would invest  4,135  in Merchants Bancorp on September 10, 2021 and sell it today you would earn a total of  440.00  from holding Merchants Bancorp or generate 10.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy97.67%
ValuesDaily Returns

Independent Bk Corp  vs.  Merchants Bancorp

 Performance (%) 
      Timeline 
Independent Bk Corp 
Independent Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Independent Bk Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Independent sustained solid returns over the last few months and may actually be approaching a breakup point.

Independent Price Channel

Merchants Bancorp 
Merchants Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merchants Bancorp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Merchants Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Merchants Price Channel

Independent and Merchants Bancorp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Independent and Merchants Bancorp

The main advantage of trading using opposite Independent and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independent 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 Independent Bk Corp 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.

Merchants Bancorp

Pair trading matchups for Merchants Bancorp

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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