Correlation Between Mercator Medical and Vercom SA

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Can any of the company-specific risk be diversified away by investing in both Mercator Medical and Vercom SA 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 Mercator Medical and Vercom SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercator Medical SA and Vercom SA, you can compare the effects of market volatilities on Mercator Medical and Vercom SA 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 Mercator Medical with a short position of Vercom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercator Medical and Vercom SA.

Diversification Opportunities for Mercator Medical and Vercom SA

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Mercator and Vercom is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mercator Medical SA and Vercom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vercom SA and Mercator Medical 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 Mercator Medical SA are associated (or correlated) with Vercom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vercom SA has no effect on the direction of Mercator Medical i.e., Mercator Medical and Vercom SA go up and down completely randomly.

Pair Corralation between Mercator Medical and Vercom SA

Assuming the 90 days trading horizon Mercator Medical SA is expected to under-perform the Vercom SA. In addition to that, Mercator Medical is 1.45 times more volatile than Vercom SA. It trades about -0.06 of its total potential returns per unit of risk. Vercom SA is currently generating about -0.02 per unit of volatility. If you would invest  12,150  in Vercom SA on September 5, 2024 and sell it today you would lose (400.00) from holding Vercom SA or give up 3.29% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Mercator Medical SA  vs.  Vercom SA

 Performance 
       Timeline  
Mercator Medical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Mercator Medical SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.
Vercom SA 

Risk-Adjusted Performance

0 of 100

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

Mercator Medical and Vercom SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mercator Medical and Vercom SA

The main advantage of trading using opposite Mercator Medical and Vercom SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercator Medical position performs unexpectedly, Vercom SA 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 Vercom SA will offset losses from the drop in Vercom SA's long position.
The idea behind Mercator Medical SA and Vercom SA 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.
Check out your portfolio center.
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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