Correlation Between Dupont De and Merchants National

Can any of the company-specific risk be diversified away by investing in both Dupont De and Merchants National 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 Dupont De and Merchants National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and Merchants National Properties, you can compare the effects of market volatilities on Dupont De and Merchants National 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 Dupont De with a short position of Merchants National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Merchants National.

Diversification Opportunities for Dupont De and Merchants National

0.07

Correlation Coefficient

Dupont De  Merchants National

Significant diversification

The 3 months correlation between Dupont and Merchants is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Merchants National Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants National and Dupont De 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 Dupont De Nemours are associated (or correlated) with Merchants National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants National has no effect on the direction of Dupont De i.e., Dupont De and Merchants National go up and down completely randomly.

Pair Corralation between Dupont De and Merchants National

Allowing for the 90-day total investment horizon Dupont De is expected to generate 3.0 times less return on investment than Merchants National. In addition to that, Dupont De is 1.44 times more volatile than Merchants National Properties. It trades about 0.02 of its total potential returns per unit of risk. Merchants National Properties is currently generating about 0.07 per unit of volatility. If you would invest  173,500  in Merchants National Properties on December 20, 2024 and sell it today you would earn a total of  7,500  from holding Merchants National Properties or generate 4.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Dupont De Nemours  vs.  Merchants National Properties

Dupont De Nemours

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Merchants National

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merchants National Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Merchants National is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dupont De and Merchants National

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

The idea behind Dupont De Nemours and Merchants National Properties 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.