Correlation Between Advanced Echem and Mercuries Data

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

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

Diversification Opportunities for Advanced Echem and Mercuries Data

0.16

Correlation Coefficient

Advanced Echem  Mercuries Data

Average diversification

The 3 months correlation between Advanced and Mercuries is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Echem Materials and Mercuries Data Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercuries Data Systems and Advanced Echem 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 Advanced Echem Materials are associated (or correlated) with Mercuries Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercuries Data Systems has no effect on the direction of Advanced Echem i.e., Advanced Echem and Mercuries Data go up and down completely randomly.

Pair Corralation between Advanced Echem and Mercuries Data

Assuming the 90 days trading horizon Advanced Echem is expected to generate 6.54 times less return on investment than Mercuries Data. But when comparing it to its historical volatility, Advanced Echem Materials is 1.16 times less risky than Mercuries Data. It trades about 0.01 of its potential returns per unit of risk. Mercuries Data Systems is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,660  in Mercuries Data Systems on October 5, 2024 and sell it today you would earn a total of  165.00  from holding Mercuries Data Systems or generate 6.2% return on investment over 90 days.

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

Advanced Echem Materials  vs.  Mercuries Data Systems

Advanced Echem Materials

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Advanced Echem Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Advanced Echem is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mercuries Data Systems

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mercuries Data Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Mercuries Data may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Advanced Echem and Mercuries Data

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

The idea behind Advanced Echem Materials and Mercuries Data Systems 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.