Correlation Between Mercuries Life and Wonderful

Can any of the company-specific risk be diversified away by investing in both Mercuries Life and Wonderful 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 Wonderful 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 Wonderful Hi Tech Co, you can compare the effects of market volatilities on Mercuries Life and Wonderful 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 Wonderful. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercuries Life and Wonderful.

Diversification Opportunities for Mercuries Life and Wonderful

0.54

Correlation Coefficient

Mercuries Life  Wonderful

Very weak diversification

The 3 months correlation between Mercuries and Wonderful is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Mercuries Life Insurance and Wonderful Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonderful Hi Tech 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 Wonderful. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonderful Hi Tech has no effect on the direction of Mercuries Life i.e., Mercuries Life and Wonderful go up and down completely randomly.

Pair Corralation between Mercuries Life and Wonderful

Assuming the 90 days trading horizon Mercuries Life is expected to generate 2.2 times less return on investment than Wonderful. But when comparing it to its historical volatility, Mercuries Life Insurance is 1.59 times less risky than Wonderful. It trades about 0.06 of its potential returns per unit of risk. Wonderful Hi Tech Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,665  in Wonderful Hi Tech Co on December 25, 2024 and sell it today you would earn a total of  305.00  from holding Wonderful Hi Tech Co or generate 8.32% return on investment over 90 days.

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

Mercuries Life Insurance  vs.  Wonderful Hi Tech Co

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.

Wonderful Hi Tech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wonderful Hi Tech Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wonderful may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mercuries Life and Wonderful

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

The idea behind Mercuries Life Insurance and Wonderful Hi Tech 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.