Correlation Between Mercuries Life and First Steamship

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

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

Diversification Opportunities for Mercuries Life and First Steamship

0.63

Correlation Coefficient

Mercuries Life  First Steamship

Poor diversification

The 3 months correlation between Mercuries and First is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Mercuries Life Insurance and First Steamship Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Steamship and Mercuries Life 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 Life Insurance are associated (or correlated) with First Steamship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Steamship has no effect on the direction of Mercuries Life i.e., Mercuries Life and First Steamship go up and down completely randomly.

Pair Corralation between Mercuries Life and First Steamship

Assuming the 90 days trading horizon Mercuries Life Insurance is expected to generate 0.81 times more return on investment than First Steamship. However, Mercuries Life Insurance is 1.23 times less risky than First Steamship. It trades about 0.05 of its potential returns per unit of risk. First Steamship Co is currently generating about 0.02 per unit of risk. If you would invest  632.00  in Mercuries Life Insurance on December 30, 2024 and sell it today you would earn a total of  18.00  from holding Mercuries Life Insurance or generate 2.85% return on investment over 90 days.

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

Mercuries Life Insurance  vs.  First Steamship Co

Mercuries Life Insurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mercuries Life Insurance are ranked lower than 3 (%) 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.

First Steamship

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Steamship Co are ranked lower than 1 (%) 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.

Pair Trading with Mercuries Life and First Steamship

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

The idea behind Mercuries Life Insurance and First Steamship Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.