Correlation Between First Steamship and Mercuries Life

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

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

Diversification Opportunities for First Steamship and Mercuries Life

0.62

Correlation Coefficient

First Steamship  Mercuries Life

Poor diversification

The 3 months correlation between First and Mercuries is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Steamship Co and Mercuries Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercuries Life Insurance and First Steamship 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 First Steamship Co are associated (or correlated) with Mercuries Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercuries Life Insurance has no effect on the direction of First Steamship i.e., First Steamship and Mercuries Life go up and down completely randomly.

Pair Corralation between First Steamship and Mercuries Life

Assuming the 90 days trading horizon First Steamship Co is expected to generate 1.22 times more return on investment than Mercuries Life. However, First Steamship is 1.22 times more volatile than Mercuries Life Insurance. It trades about 0.07 of its potential returns per unit of risk. Mercuries Life Insurance is currently generating about 0.06 per unit of risk. If you would invest  720.00  in First Steamship Co on December 25, 2024 and sell it today you would earn a total of  36.00  from holding First Steamship Co or generate 5.0% return on investment over 90 days.

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

First Steamship Co  vs.  Mercuries Life Insurance

First Steamship

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Steamship Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, First Steamship is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mercuries Life Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mercuries Life Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Mercuries Life is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Steamship and Mercuries Life

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

The idea behind First Steamship Co and Mercuries Life Insurance 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.