Correlation Between Mercury Industries and Digistar Bhd

Can any of the company-specific risk be diversified away by investing in both Mercury Industries and Digistar Bhd 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 Mercury Industries and Digistar Bhd into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mercury Industries Bhd and Digistar Bhd, you can compare the effects of market volatilities on Mercury Industries and Digistar Bhd 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 Mercury Industries with a short position of Digistar Bhd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercury Industries and Digistar Bhd.

Diversification Opportunities for Mercury Industries and Digistar Bhd

0.38

Correlation Coefficient

Mercury Industries  Digistar Bhd

Weak diversification

The 3 months correlation between Mercury and Digistar is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mercury Industries Bhd and Digistar Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digistar Bhd and Mercury Industries 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 Mercury Industries Bhd are associated (or correlated) with Digistar Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digistar Bhd has no effect on the direction of Mercury Industries i.e., Mercury Industries and Digistar Bhd go up and down completely randomly.

Pair Corralation between Mercury Industries and Digistar Bhd

Assuming the 90 days trading horizon Mercury Industries Bhd is expected to generate 0.55 times more return on investment than Digistar Bhd. However, Mercury Industries Bhd is 1.83 times less risky than Digistar Bhd. It trades about 0.01 of its potential returns per unit of risk. Digistar Bhd is currently generating about 0.0 per unit of risk. If you would invest  99.00  in Mercury Industries Bhd on October 10, 2024 and sell it today you would lose (4.00) from holding Mercury Industries Bhd or give up 4.04% of portfolio value over 90 days.

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

Mercury Industries Bhd  vs.  Digistar Bhd

Mercury Industries Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercury Industries Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Digistar Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digistar Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Mercury Industries and Digistar Bhd

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

The idea behind Mercury Industries Bhd and Digistar Bhd 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 Valuation module to check real value of public entities based on technical and fundamental data.