Correlation Between Merchants Bancorp and Charles Schwab

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

Diversification Opportunities for Merchants Bancorp and Charles Schwab

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Merchants and Charles is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and Charles Schwab go up and down completely randomly.

Pair Corralation between Merchants Bancorp and Charles Schwab

Given the investment horizon of 90 days Merchants Bancorp is expected to under-perform the Charles Schwab. In addition to that, Merchants Bancorp is 1.45 times more volatile than The Charles Schwab. It trades about -0.17 of its total potential returns per unit of risk. The Charles Schwab is currently generating about 0.21 per unit of volatility. If you would invest  7,047  in The Charles Schwab on July 8, 2022 and sell it today you would earn a total of  552.00  from holding The Charles Schwab or generate 7.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Merchants Bancorp  vs.  The Charles Schwab

 Performance (%) 
       Timeline  
Merchants Bancorp 
Merchants Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merchants Bancorp are ranked lower than 3 (%) 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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Merchants Price Channel

Charles Schwab 
Charles Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical indicators, Charles Schwab showed solid returns over the last few months and may actually be approaching a breakup point.

Charles Price Channel

Merchants Bancorp and Charles Schwab Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Merchants Bancorp and Charles Schwab

The main advantage of trading using opposite Merchants Bancorp and Charles Schwab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants Bancorp position performs unexpectedly, Charles Schwab 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 Charles Schwab will offset losses from the drop in Charles Schwab's long position.
Merchants Bancorp vs. Amazon Inc
The idea behind Merchants Bancorp and The Charles Schwab 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.
Charles Schwab vs. Amazon Inc
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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