Correlation Between Banco DE and Merchants Bancorp

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Can any of the company-specific risk be diversified away by investing in both Banco DE 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 Banco DE and Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco DE Chile and Merchants Bancorp, you can compare the effects of market volatilities on Banco DE 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 Banco DE with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco DE and Merchants Bancorp.

Diversification Opportunities for Banco DE and Merchants Bancorp

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Banco and Merchants is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Banco DE Chile and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Banco DE 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 Banco DE Chile 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 Banco DE i.e., Banco DE and Merchants Bancorp go up and down completely randomly.

Pair Corralation between Banco DE and Merchants Bancorp

Considering the 90-day investment horizon Banco DE is expected to generate 3.68 times less return on investment than Merchants Bancorp. But when comparing it to its historical volatility, Banco DE Chile is 1.02 times less risky than Merchants Bancorp. It trades about 0.02 of its potential returns per unit of risk. Merchants Bancorp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,068  in Merchants Bancorp on April 4, 2022 and sell it today you would earn a total of  1,246  from holding Merchants Bancorp or generate 116.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Banco DE Chile  vs.  Merchants Bancorp

 Performance (%) 
      Timeline 
Banco DE Chile 
Banco Performance
0 of 100
Over the last 90 days Banco DE Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in August 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0751
Payout Ratio
0.59
Last Split Factor
3:1
Forward Annual Dividend Rate
1.37
Dividend Date
2022-04-07
Ex Dividend Date
2022-03-28
Last Split Date
2018-11-23

Banco Price Channel

Merchants Bancorp 
Merchants Performance
0 of 100
Over the last 90 days Merchants Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in August 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0121
Payout Ratio
0.0467
Last Split Factor
3:2
Forward Annual Dividend Rate
0.28
Dividend Date
2022-07-01
Ex Dividend Date
2022-06-14
Last Split Date
2022-01-18

Merchants Price Channel

Banco DE and Merchants Bancorp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Banco DE and Merchants Bancorp

The main advantage of trading using opposite Banco DE and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco DE 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 Banco DE Chile 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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