Correlation Between Mercury Industries and Berjaya Food

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

Diversification Opportunities for Mercury Industries and Berjaya Food

0.22

Correlation Coefficient

Mercury Industries  Berjaya Food

Modest diversification

The 3 months correlation between Mercury and Berjaya is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Mercury Industries Bhd and Berjaya Food Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berjaya Food 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 Berjaya Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berjaya Food Bhd has no effect on the direction of Mercury Industries i.e., Mercury Industries and Berjaya Food go up and down completely randomly.

Pair Corralation between Mercury Industries and Berjaya Food

Assuming the 90 days trading horizon Mercury Industries Bhd is expected to generate 0.53 times more return on investment than Berjaya Food. However, Mercury Industries Bhd is 1.87 times less risky than Berjaya Food. It trades about 0.0 of its potential returns per unit of risk. Berjaya Food Bhd is currently generating about -0.04 per unit of risk. If you would invest  94.00  in Mercury Industries Bhd on November 29, 2024 and sell it today you would lose (1.00) from holding Mercury Industries Bhd or give up 1.06% 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.  Berjaya Food Bhd

Mercury Industries Bhd

Risk-Adjusted Performance

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.

Berjaya Food Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Berjaya Food 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 Berjaya Food

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

The idea behind Mercury Industries Bhd and Berjaya Food 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.