Correlation Between Merchants National and Pardee Resources

Can any of the company-specific risk be diversified away by investing in both Merchants National and Pardee Resources 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 Pardee Resources 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 Pardee Resources Co, you can compare the effects of market volatilities on Merchants National and Pardee Resources 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 Pardee Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants National and Pardee Resources.

Diversification Opportunities for Merchants National and Pardee Resources

0.11

Correlation Coefficient

Merchants National  Pardee Resources

Average diversification

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

Pair Corralation between Merchants National and Pardee Resources

Given the investment horizon of 90 days Merchants National Properties is expected to generate 0.7 times more return on investment than Pardee Resources. However, Merchants National Properties is 1.42 times less risky than Pardee Resources. It trades about 0.03 of its potential returns per unit of risk. Pardee Resources Co is currently generating about 0.01 per unit of risk. If you would invest  178,000  in Merchants National Properties on December 21, 2024 and sell it today you would earn a total of  3,000  from holding Merchants National Properties or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Merchants National Properties  vs.  Pardee Resources Co

Merchants National

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merchants National Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Merchants National is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pardee Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pardee Resources Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Pardee Resources is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Merchants National and Pardee Resources

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

The idea behind Merchants National Properties and Pardee Resources Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.