Correlation Between Mercury Systems and Archer Aviation

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

By analyzing existing cross correlation between Mercury Systems and Archer Aviation, you can compare the effects of market volatilities on Mercury Systems and Archer Aviation 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 Mercury Systems with a short position of Archer Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercury Systems and Archer Aviation.

Diversification Opportunities for Mercury Systems and Archer Aviation

0.59

Correlation Coefficient

Mercury Systems  Archer Aviation

Very weak diversification

The 3 months correlation between Mercury and Archer is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Mercury Systems and Archer Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Aviation and Mercury Systems 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 Mercury Systems are associated (or correlated) with Archer Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Aviation has no effect on the direction of Mercury Systems i.e., Mercury Systems and Archer Aviation go up and down completely randomly.

Pair Corralation between Mercury Systems and Archer Aviation

Given the investment horizon of 90 days Mercury Systems is expected to generate 8.48 times less return on investment than Archer Aviation. But when comparing it to its historical volatility, Mercury Systems is 1.74 times less risky than Archer Aviation. It trades about 0.05 of its potential returns per unit of risk. Archer Aviation is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  340.00  in Archer Aviation on August 30, 2024 and sell it today you would earn a total of  468.00  from holding Archer Aviation or generate 137.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Mercury Systems  vs.  Archer Aviation

Mercury Systems

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mercury Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Mercury Systems may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Archer Aviation

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Aviation are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical indicators, Archer Aviation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mercury Systems and Archer Aviation

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

The idea behind Mercury Systems and Archer Aviation 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.