Correlation Between IT Tech and Mercer International

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

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

Diversification Opportunities for IT Tech and Mercer International

0.11

Correlation Coefficient

IT Tech  Mercer International

Average diversification

The 3 months correlation between ITP and Mercer is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding IT Tech Packaging and Mercer International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercer International and IT Tech 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 IT Tech Packaging are associated (or correlated) with Mercer International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercer International has no effect on the direction of IT Tech i.e., IT Tech and Mercer International go up and down completely randomly.

Pair Corralation between IT Tech and Mercer International

Considering the 90-day investment horizon IT Tech Packaging is expected to generate 4.9 times more return on investment than Mercer International. However, IT Tech is 4.9 times more volatile than Mercer International. It trades about 0.05 of its potential returns per unit of risk. Mercer International is currently generating about 0.01 per unit of risk. If you would invest  27.00  in IT Tech Packaging on December 27, 2024 and sell it today you would earn a total of  0.00  from holding IT Tech Packaging or generate 0.0% return on investment over 90 days.

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

IT Tech Packaging  vs.  Mercer International

IT Tech Packaging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IT Tech Packaging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IT Tech reported solid returns over the last few months and may actually be approaching a breakup point.

Mercer International

Risk-Adjusted Performance

Weak

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

Pair Trading with IT Tech and Mercer International

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

The idea behind IT Tech Packaging and Mercer International 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.