Correlation Between Mercantile Bank and Assurant
Can any of the company-specific risk be diversified away by investing in both Mercantile Bank and Assurant 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 Mercantile Bank and Assurant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercantile Bank and Assurant, you can compare the effects of market volatilities on Mercantile Bank and Assurant 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 Mercantile Bank with a short position of Assurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Bank and Assurant.
Diversification Opportunities for Mercantile Bank and Assurant
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mercantile and Assurant is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mercantile Bank and Assurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assurant and Mercantile Bank 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 Mercantile Bank are associated (or correlated) with Assurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assurant has no effect on the direction of Mercantile Bank i.e., Mercantile Bank and Assurant go up and down completely randomly.
Pair Corralation between Mercantile Bank and Assurant
Given the investment horizon of 90 days Mercantile Bank is expected to generate 1.2 times more return on investment than Assurant. However, Mercantile Bank is 1.2 times more volatile than Assurant. It trades about 0.03 of its potential returns per unit of risk. Assurant is currently generating about 0.01 per unit of risk. If you would invest 2,865 in Mercantile Bank on January 29, 2024 and sell it today you would earn a total of 754.00 from holding Mercantile Bank or generate 26.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Mercantile Bank vs. Assurant
Performance |
Timeline |
Mercantile Bank |
Assurant |
Mercantile Bank and Assurant Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mercantile Bank and Assurant
The main advantage of trading using opposite Mercantile Bank and Assurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Bank position performs unexpectedly, Assurant 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 Assurant will offset losses from the drop in Assurant's long position.Mercantile Bank vs. Macatawa Bank | Mercantile Bank vs. Great Southern Bancorp | Mercantile Bank vs. First Bancorp | Mercantile Bank vs. MidWestOne Financial Group |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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