Correlation Between Mercury Corp and Busan Ind

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

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

Diversification Opportunities for Mercury Corp and Busan Ind

0.08

Correlation Coefficient

Mercury Corp  Busan Ind

Significant diversification

The 3 months correlation between Mercury and Busan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Mercury Corp and Busan Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Ind and Mercury Corp 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 Mercury Corp are associated (or correlated) with Busan Ind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Busan Ind has no effect on the direction of Mercury Corp i.e., Mercury Corp and Busan Ind go up and down completely randomly.

Pair Corralation between Mercury Corp and Busan Ind

Assuming the 90 days trading horizon Mercury Corp is expected to generate 1.13 times more return on investment than Busan Ind. However, Mercury Corp is 1.13 times more volatile than Busan Ind. It trades about 0.35 of its potential returns per unit of risk. Busan Ind is currently generating about 0.13 per unit of risk. If you would invest  303,500  in Mercury Corp on October 8, 2024 and sell it today you would earn a total of  108,000  from holding Mercury Corp or generate 35.58% return on investment over 90 days.

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

Mercury Corp  vs.  Busan Ind

Mercury Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mercury Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mercury Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Busan Ind

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Ind are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Busan Ind sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mercury Corp and Busan Ind

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

The idea behind Mercury Corp and Busan Ind 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.