Correlation Between Merchants Bancorp and Timothy Plan

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

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

Diversification Opportunities for Merchants Bancorp and Timothy Plan

0.21

Correlation Coefficient

Merchants Bancorp  Timothy Plan

Modest diversification

The 3 months correlation between Merchants and Timothy is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and Timothy Plan Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan Growth 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 Timothy Plan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Plan Growth has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and Timothy Plan go up and down completely randomly.

Pair Corralation between Merchants Bancorp and Timothy Plan

Given the investment horizon of 90 days Merchants Bancorp is expected to under-perform the Timothy Plan. In addition to that, Merchants Bancorp is 4.75 times more volatile than Timothy Plan Growth. It trades about -0.17 of its total potential returns per unit of risk. Timothy Plan Growth is currently generating about -0.2 per unit of volatility. If you would invest  1,057  in Timothy Plan Growth on January 20, 2024 and sell it today you would lose (20.00) from holding Timothy Plan Growth or give up 1.89% of portfolio value over 90 days.

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

Merchants Bancorp  vs.  Timothy Plan Growth

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 conflicting 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.

Timothy Plan Growth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Timothy Plan Growth are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Timothy Plan 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 Timothy Plan

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

The idea behind Merchants Bancorp and Timothy Plan Growth 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.