Correlation Between Armada Mercantile and Mentor Capital

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

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

Diversification Opportunities for Armada Mercantile and Mentor Capital

-0.17

Correlation Coefficient

Armada Mercantile  Mentor Capital

Good diversification

The 3 months correlation between Armada and Mentor is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Armada Mercantile and Mentor Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mentor 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 Mentor Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mentor Capital has no effect on the direction of Armada Mercantile i.e., Armada Mercantile and Mentor Capital go up and down completely randomly.

Pair Corralation between Armada Mercantile and Mentor Capital

Assuming the 90 days horizon Armada Mercantile is expected to generate 2.3 times more return on investment than Mentor Capital. However, Armada Mercantile is 2.3 times more volatile than Mentor Capital. It trades about 0.05 of its potential returns per unit of risk. Mentor Capital is currently generating about -0.02 per unit of risk. If you would invest  30.00  in Armada Mercantile on December 29, 2024 and sell it today you would lose (7.00) from holding Armada Mercantile or give up 23.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Armada Mercantile  vs.  Mentor Capital

Armada Mercantile

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Armada Mercantile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Armada Mercantile reported solid returns over the last few months and may actually be approaching a breakup point.

Mentor Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mentor Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Armada Mercantile and Mentor Capital

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

The idea behind Armada Mercantile and Mentor 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.