Correlation Between Elis SA and Mersen SA

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

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

Diversification Opportunities for Elis SA and Mersen SA

0.15

Correlation Coefficient

Elis SA  Mersen SA

Average diversification

The 3 months correlation between Elis and Mersen is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Elis SA and Mersen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mersen SA and Elis SA 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 Elis SA are associated (or correlated) with Mersen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mersen SA has no effect on the direction of Elis SA i.e., Elis SA and Mersen SA go up and down completely randomly.

Pair Corralation between Elis SA and Mersen SA

Assuming the 90 days trading horizon Elis SA is expected to generate 5.07 times less return on investment than Mersen SA. But when comparing it to its historical volatility, Elis SA is 2.14 times less risky than Mersen SA. It trades about 0.03 of its potential returns per unit of risk. Mersen SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,900  in Mersen SA on December 2, 2024 and sell it today you would earn a total of  200.00  from holding Mersen SA or generate 10.53% return on investment over 90 days.

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

Elis SA  vs.  Mersen SA

Elis SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elis SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Elis SA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Mersen SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mersen SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mersen SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Elis SA and Mersen SA

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

The idea behind Elis SA and Mersen 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.