Correlation Between Merchants Bancorp and Fidelity Freedom

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

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

Diversification Opportunities for Merchants Bancorp and Fidelity Freedom

0.13

Correlation Coefficient

Merchants Bancorp  Fidelity Freedom

Average diversification

The 3 months correlation between Merchants and Fidelity is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and Fidelity Freedom Blend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Freedom Blend and Merchants 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 Merchants Bancorp are associated (or correlated) with Fidelity Freedom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Freedom Blend has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and Fidelity Freedom go up and down completely randomly.

Pair Corralation between Merchants Bancorp and Fidelity Freedom

If you would invest  2,403  in Merchants Bancorp on January 17, 2024 and sell it today you would earn a total of  1,409  from holding Merchants Bancorp or generate 58.64% return on investment over 90 days.

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

Merchants Bancorp  vs.  Fidelity Freedom Blend

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 very healthy forward indicators, Merchants Bancorp is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Fidelity Freedom Blend

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Freedom Blend are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Fidelity Freedom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merchants Bancorp and Fidelity Freedom

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

The idea behind Merchants Bancorp and Fidelity Freedom Blend 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.