Correlation Between Merchants National and National Stock

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

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

Diversification Opportunities for Merchants National and National Stock

-0.12

Correlation Coefficient

Merchants National  National Stock

Good diversification

The 3 months correlation between Merchants and National is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Merchants National Properties and National Stock Yards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Stock Yards and Merchants National 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 Merchants National Properties are associated (or correlated) with National Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Stock Yards has no effect on the direction of Merchants National i.e., Merchants National and National Stock go up and down completely randomly.

Pair Corralation between Merchants National and National Stock

Given the investment horizon of 90 days Merchants National Properties is expected to generate 1.03 times more return on investment than National Stock. However, Merchants National is 1.03 times more volatile than National Stock Yards. It trades about -0.06 of its potential returns per unit of risk. National Stock Yards is currently generating about -0.12 per unit of risk. If you would invest  175,000  in Merchants National Properties on October 9, 2024 and sell it today you would lose (4,000) from holding Merchants National Properties or give up 2.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Merchants National Properties  vs.  National Stock Yards

Merchants National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merchants National Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Merchants National is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

National Stock Yards

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Stock Yards are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, National Stock exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merchants National and National Stock

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

The idea behind Merchants National Properties and National Stock Yards 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.