Correlation Between NEXCOM International and Mercuries Data

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

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

Diversification Opportunities for NEXCOM International and Mercuries Data

0.23

Correlation Coefficient

NEXCOM International  Mercuries Data

Modest diversification

The 3 months correlation between NEXCOM and Mercuries is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NEXCOM International Co 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 NEXCOM International 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 NEXCOM International Co 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 NEXCOM International i.e., NEXCOM International and Mercuries Data go up and down completely randomly.

Pair Corralation between NEXCOM International and Mercuries Data

Assuming the 90 days trading horizon NEXCOM International Co is expected to generate 1.38 times more return on investment than Mercuries Data. However, NEXCOM International is 1.38 times more volatile than Mercuries Data Systems. It trades about 0.27 of its potential returns per unit of risk. Mercuries Data Systems is currently generating about -0.09 per unit of risk. If you would invest  5,230  in NEXCOM International Co on October 10, 2024 and sell it today you would earn a total of  1,160  from holding NEXCOM International Co or generate 22.18% return on investment over 90 days.

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

NEXCOM International Co  vs.  Mercuries Data Systems

NEXCOM International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEXCOM International Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NEXCOM International showed solid returns over the last few months and may actually be approaching a breakup point.

Mercuries Data Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercuries Data Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mercuries Data 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 NEXCOM International and Mercuries Data

The main advantage of trading using opposite NEXCOM International and Mercuries Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXCOM International 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 NEXCOM International Co 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.