Correlation Between Mercury Industries and British American

Can any of the company-specific risk be diversified away by investing in both Mercury Industries and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Mercury Industries and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercury Industries and British American.

Diversification Opportunities for Mercury Industries and British American

-0.23

Correlation Coefficient

Mercury Industries  British American

Very good diversification

The 3 months correlation between Mercury and British is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Mercury Industries Bhd and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Mercury Industries i.e., Mercury Industries and British American go up and down completely randomly.

Pair Corralation between Mercury Industries and British American

Assuming the 90 days trading horizon Mercury Industries Bhd is expected to under-perform the British American. In addition to that, Mercury Industries is 1.27 times more volatile than British American Tobacco. It trades about -0.01 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.01 per unit of volatility. If you would invest  772.00  in British American Tobacco on September 3, 2024 and sell it today you would lose (3.00) from holding British American Tobacco or give up 0.39% of portfolio value over 90 days.

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

Mercury Industries Bhd  vs.  British American Tobacco

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 quite persistent basic indicators, Mercury Industries is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

British American Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days British American Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, British American is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mercury Industries and British American

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

The idea behind Mercury Industries Bhd and British American Tobacco 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.