Correlation Between NI Holdings and Merchants Bancorp

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

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

Diversification Opportunities for NI Holdings and Merchants Bancorp

0.65

Correlation Coefficient

NI Holdings  Merchants Bancorp

Poor diversification

The 3 months correlation between NODK and Merchants is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and NI Holdings 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 NI Holdings 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 NI Holdings i.e., NI Holdings and Merchants Bancorp go up and down completely randomly.

Pair Corralation between NI Holdings and Merchants Bancorp

Given the investment horizon of 90 days NI Holdings is expected to generate 0.68 times more return on investment than Merchants Bancorp. However, NI Holdings is 1.46 times less risky than Merchants Bancorp. It trades about 0.04 of its potential returns per unit of risk. Merchants Bancorp is currently generating about -0.02 per unit of risk. If you would invest  1,227  in NI Holdings on May 6, 2025 and sell it today you would earn a total of  39.00  from holding NI Holdings or generate 3.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NI Holdings  vs.  Merchants Bancorp

NI Holdings

Risk-Adjusted Performance

Weak

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

Merchants Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merchants Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Merchants Bancorp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NI Holdings and Merchants Bancorp

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

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.