Correlation Between Merchant Bank and Citrus Leisure

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

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

Diversification Opportunities for Merchant Bank and Citrus Leisure

-0.31

Correlation Coefficient

Merchant Bank  Citrus Leisure

Very good diversification

The 3 months correlation between Merchant and Citrus is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Merchant Bank of and Citrus Leisure PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citrus Leisure PLC and Merchant Bank 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 Merchant Bank of are associated (or correlated) with Citrus Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citrus Leisure PLC has no effect on the direction of Merchant Bank i.e., Merchant Bank and Citrus Leisure go up and down completely randomly.

Pair Corralation between Merchant Bank and Citrus Leisure

Assuming the 90 days trading horizon Merchant Bank of is expected to under-perform the Citrus Leisure. In addition to that, Merchant Bank is 1.47 times more volatile than Citrus Leisure PLC. It trades about -0.23 of its total potential returns per unit of risk. Citrus Leisure PLC is currently generating about -0.26 per unit of volatility. If you would invest  440.00  in Citrus Leisure PLC on December 4, 2024 and sell it today you would lose (30.00) from holding Citrus Leisure PLC or give up 6.82% of portfolio value over 90 days.

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

Merchant Bank of  vs.  Citrus Leisure PLC

Merchant Bank

Risk-Adjusted Performance

Modest

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

Citrus Leisure PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citrus Leisure PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Merchant Bank and Citrus Leisure

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

The idea behind Merchant Bank of and Citrus Leisure PLC 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.