Correlation Between Howard Bancorp and Merchants Bancorp

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

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

Diversification Opportunities for Howard Bancorp and Merchants Bancorp

0.64
  Correlation Coefficient
Howard Bancorp MD
Merchants Bancorp

Poor diversification

The 3 months correlation between Howard and Merchants is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Howard Bancorp MD and Merchants Bancorp in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Howard 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 Howard Bancorp MD 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 Howard Bancorp i.e., Howard Bancorp and Merchants Bancorp go up and down completely randomly.

Pair Corralation between Howard Bancorp and Merchants Bancorp

Given the investment horizon of 90 days Howard Bancorp is expected to generate 1.65 times less return on investment than Merchants Bancorp. In addition to that, Howard Bancorp is 1.15 times more volatile than Merchants Bancorp. It trades about 0.04 of its total potential returns per unit of risk. Merchants Bancorp is currently generating about 0.07 per unit of volatility. If you would invest  1,290  in Merchants Bancorp on October 25, 2021 and sell it today you would earn a total of  1,665  from holding Merchants Bancorp or generate 129.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Howard Bancorp MD  vs.  Merchants Bancorp

 Performance (%) 
      Timeline 
Howard Bancorp MD 
Howard Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Howard Bancorp MD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Howard Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2022.

Howard Price Channel

Merchants Bancorp 
Merchants Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merchants Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Merchants Bancorp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Merchants Price Channel

Howard Bancorp and Merchants Bancorp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Howard Bancorp and Merchants Bancorp

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

Howard Bancorp MD

Pair trading matchups for Howard Bancorp

The idea behind Howard Bancorp MD 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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