Correlation Between China Mobile and Mercuries Data

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

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

Diversification Opportunities for China Mobile and Mercuries Data

0.04

Correlation Coefficient

China Mobile  Mercuries Data

Significant diversification

The 3 months correlation between China and Mercuries is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile and Mercuries Data Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercuries Data Systems and China Mobile 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 China Mobile are associated (or correlated) with Mercuries Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercuries Data Systems has no effect on the direction of China Mobile i.e., China Mobile and Mercuries Data go up and down completely randomly.

Pair Corralation between China Mobile and Mercuries Data

Assuming the 90 days trading horizon China Mobile is expected to under-perform the Mercuries Data. But the stock apears to be less risky and, when comparing its historical volatility, China Mobile is 1.87 times less risky than Mercuries Data. The stock trades about -0.04 of its potential returns per unit of risk. The Mercuries Data Systems is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,590  in Mercuries Data Systems on September 16, 2024 and sell it today you would earn a total of  45.00  from holding Mercuries Data Systems or generate 1.74% return on investment over 90 days.

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

China Mobile  vs.  Mercuries Data Systems

China Mobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, China Mobile is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Mercuries Data Systems

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mercuries Data Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Mercuries Data is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with China Mobile and Mercuries Data

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

The idea behind China Mobile and Mercuries Data Systems 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.