Correlation Between President Chain and Mercuries Associates

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

By analyzing existing cross correlation between President Chain Store and Mercuries Associates Holding, you can compare the effects of market volatilities on President Chain and Mercuries Associates 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 President Chain with a short position of Mercuries Associates. Check out your portfolio center. Please also check ongoing floating volatility patterns of President Chain and Mercuries Associates.

Diversification Opportunities for President Chain and Mercuries Associates

0.76

Correlation Coefficient

President Chain  Mercuries Associates

Poor diversification

The 3 months correlation between President and Mercuries is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding President Chain Store and Mercuries Associates Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercuries Associates and President Chain 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 President Chain Store are associated (or correlated) with Mercuries Associates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercuries Associates has no effect on the direction of President Chain i.e., President Chain and Mercuries Associates go up and down completely randomly.

Pair Corralation between President Chain and Mercuries Associates

Assuming the 90 days trading horizon President Chain Store is expected to under-perform the Mercuries Associates. But the stock apears to be less risky and, when comparing its historical volatility, President Chain Store is 1.37 times less risky than Mercuries Associates. The stock trades about -0.17 of its potential returns per unit of risk. The Mercuries Associates Holding is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,680  in Mercuries Associates Holding on October 20, 2024 and sell it today you would lose (75.00) from holding Mercuries Associates Holding or give up 4.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

President Chain Store  vs.  Mercuries Associates Holding

President Chain Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Chain Store has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Mercuries Associates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercuries Associates Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mercuries Associates 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 President Chain and Mercuries Associates

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

The idea behind President Chain Store and Mercuries Associates Holding 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.