Correlation Between Mercantile Investment and Bankers Investment

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

By analyzing existing cross correlation between The Mercantile Investment and Bankers Investment Trust, you can compare the effects of market volatilities on Mercantile Investment and Bankers Investment 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 Mercantile Investment with a short position of Bankers Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Investment and Bankers Investment.

Diversification Opportunities for Mercantile Investment and Bankers Investment

0.66

Correlation Coefficient

Mercantile Investment  Bankers Investment

Poor diversification

The 3 months correlation between Mercantile and Bankers is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment and Bankers Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankers Investment Trust and Mercantile Investment 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 The Mercantile Investment are associated (or correlated) with Bankers Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankers Investment Trust has no effect on the direction of Mercantile Investment i.e., Mercantile Investment and Bankers Investment go up and down completely randomly.

Pair Corralation between Mercantile Investment and Bankers Investment

Assuming the 90 days trading horizon The Mercantile Investment is expected to generate 0.9 times more return on investment than Bankers Investment. However, The Mercantile Investment is 1.11 times less risky than Bankers Investment. It trades about -0.11 of its potential returns per unit of risk. Bankers Investment Trust is currently generating about -0.12 per unit of risk. If you would invest  24,300  in The Mercantile Investment on December 1, 2024 and sell it today you would lose (500.00) from holding The Mercantile Investment or give up 2.06% of portfolio value over 90 days.

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

The Mercantile Investment  vs.  Bankers Investment Trust

The Mercantile Investment

Risk-Adjusted Performance

Weak

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

Bankers Investment Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bankers Investment Trust are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of comparatively stable basic indicators, Bankers Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mercantile Investment and Bankers Investment

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

The idea behind The Mercantile Investment and Bankers Investment Trust 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.