Correlation Between Mercantile Investment and Sovereign Metals

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

Diversification Opportunities for Mercantile Investment and Sovereign Metals

-0.44

Correlation Coefficient

Mercantile Investment  Sovereign Metals

Very good diversification

The 3 months correlation between Mercantile and Sovereign is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals 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 Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Mercantile Investment i.e., Mercantile Investment and Sovereign Metals go up and down completely randomly.

Pair Corralation between Mercantile Investment and Sovereign Metals

Assuming the 90 days trading horizon Mercantile Investment is expected to generate 26.86 times less return on investment than Sovereign Metals. But when comparing it to its historical volatility, The Mercantile Investment is 2.43 times less risky than Sovereign Metals. It trades about 0.02 of its potential returns per unit of risk. Sovereign Metals is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,950  in Sovereign Metals on September 12, 2024 and sell it today you would earn a total of  1,000.00  from holding Sovereign Metals or generate 33.9% return on investment over 90 days.

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

The Mercantile Investment  vs.  Sovereign Metals

The Mercantile Investment

Risk-Adjusted Performance

1 of 100

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sovereign Metals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sovereign Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mercantile Investment and Sovereign Metals

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

The idea behind The Mercantile Investment and Sovereign Metals 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.