Correlation Between Dassault Aviation and Mercury Systems

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

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

Diversification Opportunities for Dassault Aviation and Mercury Systems

-0.48

Correlation Coefficient

Dassault Aviation  Mercury Systems

Very good diversification

The 3 months correlation between Dassault and Mercury is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Aviation SA and Mercury Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Systems and Dassault Aviation 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 Dassault Aviation SA 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 Dassault Aviation i.e., Dassault Aviation and Mercury Systems go up and down completely randomly.

Pair Corralation between Dassault Aviation and Mercury Systems

Assuming the 90 days horizon Dassault Aviation is expected to generate 1.26 times less return on investment than Mercury Systems. In addition to that, Dassault Aviation is 1.06 times more volatile than Mercury Systems. It trades about 0.02 of its total potential returns per unit of risk. Mercury Systems is currently generating about 0.03 per unit of volatility. If you would invest  3,628  in Mercury Systems on October 3, 2024 and sell it today you would earn a total of  572.00  from holding Mercury Systems or generate 15.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.15%
Values	Daily Returns

Dassault Aviation SA  vs.  Mercury Systems

Dassault Aviation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Aviation SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dassault Aviation is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mercury Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mercury Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Mercury Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dassault Aviation and Mercury Systems

The main advantage of trading using opposite Dassault Aviation and Mercury Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dassault Aviation 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 Dassault Aviation SA 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.