Correlation Between Ducommun Incorporated and Mercury Systems

Can any of the company-specific risk be diversified away by investing in both Ducommun Incorporated and Mercury Systems 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 Ducommun Incorporated and Mercury Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Ducommun Incorporated and Mercury Systems

-0.24

Correlation Coefficient

Ducommun Incorporated  Mercury Systems

Very good diversification

The 3 months correlation between Ducommun and Mercury is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ducommun Incorporated and Mercury Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Systems and Ducommun Incorporated 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 Ducommun Incorporated are associated (or correlated) with Mercury Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Systems has no effect on the direction of Ducommun Incorporated i.e., Ducommun Incorporated and Mercury Systems go up and down completely randomly.

Pair Corralation between Ducommun Incorporated and Mercury Systems

Considering the 90-day investment horizon Ducommun Incorporated is expected to under-perform the Mercury Systems. But the stock apears to be less risky and, when comparing its historical volatility, Ducommun Incorporated is 2.04 times less risky than Mercury Systems. The stock trades about -0.01 of its potential returns per unit of risk. The Mercury Systems is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,200  in Mercury Systems on December 29, 2024 and sell it today you would earn a total of  160.00  from holding Mercury Systems or generate 3.81% return on investment over 90 days.

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

Ducommun Incorporated  vs.  Mercury Systems

Ducommun Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ducommun Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Ducommun Incorporated is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Mercury Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mercury Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Mercury Systems may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ducommun Incorporated and Mercury Systems

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

The idea behind Ducommun Incorporated and Mercury 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.