Correlation Between Armada Mercantile and First BITCoin

Can any of the company-specific risk be diversified away by investing in both Armada Mercantile and First BITCoin 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 Armada Mercantile and First BITCoin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Armada Mercantile and First BITCoin Capital, you can compare the effects of market volatilities on Armada Mercantile and First BITCoin 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 Armada Mercantile with a short position of First BITCoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Mercantile and First BITCoin.

Diversification Opportunities for Armada Mercantile and First BITCoin

0.0

Correlation Coefficient

Armada Mercantile  First BITCoin

Pay attention - limited upside

The 3 months correlation between Armada and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Armada Mercantile and First BITCoin Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First BITCoin Capital and Armada Mercantile 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 Armada Mercantile are associated (or correlated) with First BITCoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First BITCoin Capital has no effect on the direction of Armada Mercantile i.e., Armada Mercantile and First BITCoin go up and down completely randomly.

Pair Corralation between Armada Mercantile and First BITCoin

Assuming the 90 days horizon Armada Mercantile is expected to generate 48.52 times less return on investment than First BITCoin. But when comparing it to its historical volatility, Armada Mercantile is 14.08 times less risky than First BITCoin. It trades about 0.03 of its potential returns per unit of risk. First BITCoin Capital is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.18  in First BITCoin Capital on September 12, 2024 and sell it today you would lose (0.17) from holding First BITCoin Capital or give up 94.44% of portfolio value over 90 days.

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

Armada Mercantile  vs.  First BITCoin Capital

Armada Mercantile

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Armada Mercantile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

First BITCoin Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First BITCoin Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, First BITCoin is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Armada Mercantile and First BITCoin

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

The idea behind Armada Mercantile and First BITCoin Capital 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.