Correlation Between Dupont Denemours and Merchants Bancorp

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

Diversification Opportunities for Dupont Denemours and Merchants Bancorp

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Dupont and Merchants is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dupont Denemours and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Dupont Denemours 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 Dupont Denemours 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 Dupont Denemours i.e., Dupont Denemours and Merchants Bancorp go up and down completely randomly.

Pair Corralation between Dupont Denemours and Merchants Bancorp

Allowing for the 90-day total investment horizon Dupont Denemours is expected to generate 1.84 times less return on investment than Merchants Bancorp. In addition to that, Dupont Denemours is 1.09 times more volatile than Merchants Bancorp. It trades about 0.32 of its total potential returns per unit of risk. Merchants Bancorp is currently generating about 0.65 per unit of volatility. If you would invest  2,222  in Merchants Bancorp on May 14, 2022 and sell it today you would earn a total of  613.00  from holding Merchants Bancorp or generate 27.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Dupont Denemours  vs.  Merchants Bancorp

 Performance (%) 
       Timeline  
Dupont Denemours 
Dupont Performance
0 of 100
Over the last 90 days Dupont Denemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont Denemours is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dupont Price Channel

Merchants Bancorp 
Merchants Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merchants Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady forward indicators, Merchants Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Merchants Price Channel

Dupont Denemours and Merchants Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dupont Denemours and Merchants Bancorp

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