Correlation Between SentinelOne and First Merchants

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

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

Diversification Opportunities for SentinelOne and First Merchants

0.25

Correlation Coefficient

SentinelOne  First Merchants

Modest diversification

The 3 months correlation between SentinelOne and First is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and SentinelOne 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 SentinelOne are associated (or correlated) with First Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of SentinelOne i.e., SentinelOne and First Merchants go up and down completely randomly.

Pair Corralation between SentinelOne and First Merchants

Taking into account the 90-day investment horizon SentinelOne is expected to generate 2.06 times less return on investment than First Merchants. In addition to that, SentinelOne is 1.67 times more volatile than First Merchants. It trades about 0.05 of its total potential returns per unit of risk. First Merchants is currently generating about 0.16 per unit of volatility. If you would invest  3,521  in First Merchants on April 25, 2025 and sell it today you would earn a total of  583.00  from holding First Merchants or generate 16.56% return on investment over 90 days.

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

SentinelOne  vs.  First Merchants

SentinelOne

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SentinelOne are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SentinelOne may actually be approaching a critical reversion point that can send shares even higher in August 2025.

First Merchants

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Merchants are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, First Merchants exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SentinelOne and First Merchants

The main advantage of trading using opposite SentinelOne and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SentinelOne position performs unexpectedly, First Merchants 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 First Merchants will offset losses from the drop in First Merchants' long position.

The idea behind SentinelOne and First Merchants 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.