Correlation Between DB Financial and Mercury Corp

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

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

Diversification Opportunities for DB Financial and Mercury Corp

-0.21

Correlation Coefficient

DB Financial  Mercury Corp

Very good diversification

The 3 months correlation between 016610 and Mercury is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and Mercury Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Corp and DB Financial 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 DB Financial Investment are associated (or correlated) with Mercury Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Corp has no effect on the direction of DB Financial i.e., DB Financial and Mercury Corp go up and down completely randomly.

Pair Corralation between DB Financial and Mercury Corp

Assuming the 90 days trading horizon DB Financial Investment is expected to generate 0.44 times more return on investment than Mercury Corp. However, DB Financial Investment is 2.26 times less risky than Mercury Corp. It trades about 0.15 of its potential returns per unit of risk. Mercury Corp is currently generating about -0.15 per unit of risk. If you would invest  540,000  in DB Financial Investment on December 24, 2024 and sell it today you would earn a total of  50,000  from holding DB Financial Investment or generate 9.26% return on investment over 90 days.

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

DB Financial Investment  vs.  Mercury Corp

DB Financial Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DB Financial Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DB Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mercury Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mercury Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with DB Financial and Mercury Corp

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

The idea behind DB Financial Investment and Mercury Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.