Correlation Between Mercuries Data and FDC International

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

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

Diversification Opportunities for Mercuries Data and FDC International

0.23

Correlation Coefficient

Mercuries Data  FDC International

Modest diversification

The 3 months correlation between Mercuries and FDC is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Mercuries Data Systems and FDC International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDC International Hotels and Mercuries Data 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 Mercuries Data Systems are associated (or correlated) with FDC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDC International Hotels has no effect on the direction of Mercuries Data i.e., Mercuries Data and FDC International go up and down completely randomly.

Pair Corralation between Mercuries Data and FDC International

Assuming the 90 days trading horizon Mercuries Data Systems is expected to generate 1.72 times more return on investment than FDC International. However, Mercuries Data is 1.72 times more volatile than FDC International Hotels. It trades about 0.03 of its potential returns per unit of risk. FDC International Hotels is currently generating about 0.0 per unit of risk. If you would invest  2,675  in Mercuries Data Systems on October 6, 2024 and sell it today you would earn a total of  55.00  from holding Mercuries Data Systems or generate 2.06% return on investment over 90 days.

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

Mercuries Data Systems  vs.  FDC International Hotels

Mercuries Data Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mercuries Data Systems are ranked lower than 2 (%) 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.

FDC International Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FDC International Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, FDC International 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 Mercuries Data and FDC International

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

The idea behind Mercuries Data Systems and FDC International Hotels 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.