Correlation Between Creotech Instruments and Mercator Medical

Can any of the company-specific risk be diversified away by investing in both Creotech Instruments and Mercator Medical 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 Creotech Instruments and Mercator Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Creotech Instruments SA and Mercator Medical SA, you can compare the effects of market volatilities on Creotech Instruments and Mercator Medical 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 Creotech Instruments with a short position of Mercator Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Creotech Instruments and Mercator Medical.

Diversification Opportunities for Creotech Instruments and Mercator Medical

0.01

Correlation Coefficient

Creotech Instruments  Mercator Medical

Significant diversification

The 3 months correlation between Creotech and Mercator is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Creotech Instruments SA and Mercator Medical SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercator Medical and Creotech Instruments 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 Creotech Instruments SA are associated (or correlated) with Mercator Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercator Medical has no effect on the direction of Creotech Instruments i.e., Creotech Instruments and Mercator Medical go up and down completely randomly.

Pair Corralation between Creotech Instruments and Mercator Medical

Assuming the 90 days trading horizon Creotech Instruments SA is expected to generate 1.09 times more return on investment than Mercator Medical. However, Creotech Instruments is 1.09 times more volatile than Mercator Medical SA. It trades about 0.21 of its potential returns per unit of risk. Mercator Medical SA is currently generating about -0.05 per unit of risk. If you would invest  12,800  in Creotech Instruments SA on October 24, 2024 and sell it today you would earn a total of  5,700  from holding Creotech Instruments SA or generate 44.53% return on investment over 90 days.

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

Creotech Instruments SA  vs.  Mercator Medical SA

Creotech Instruments

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Creotech Instruments SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Creotech Instruments reported solid returns over the last few months and may actually be approaching a breakup point.

Mercator Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercator Medical SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak 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 Creotech Instruments and Mercator Medical

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

The idea behind Creotech Instruments SA and Mercator Medical SA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.