Correlation Between Eve Holding and Mercury Systems

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

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

Diversification Opportunities for Eve Holding and Mercury Systems

0.33

Correlation Coefficient

Eve Holding  Mercury Systems

Weak diversification

The 3 months correlation between Eve and Mercury is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Eve Holding and Mercury Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Systems and Eve Holding 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 Eve Holding 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 Eve Holding i.e., Eve Holding and Mercury Systems go up and down completely randomly.

Pair Corralation between Eve Holding and Mercury Systems

Given the investment horizon of 90 days Eve Holding is expected to generate 1.27 times more return on investment than Mercury Systems. However, Eve Holding is 1.27 times more volatile than Mercury Systems. It trades about 0.12 of its potential returns per unit of risk. Mercury Systems is currently generating about 0.1 per unit of risk. If you would invest  325.00  in Eve Holding on September 30, 2024 and sell it today you would earn a total of  216.00  from holding Eve Holding or generate 66.46% return on investment over 90 days.

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

Eve Holding  vs.  Mercury Systems

Eve Holding

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eve Holding are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Eve Holding showed solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady fundamental indicators, Mercury Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eve Holding and Mercury Systems

The main advantage of trading using opposite Eve Holding and Mercury Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eve Holding 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 Eve Holding 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.