Correlation Between Mercury Systems and Eve Holding

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

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

Diversification Opportunities for Mercury Systems and Eve Holding

-0.45

Correlation Coefficient

Mercury Systems  Eve Holding

Very good diversification

The 3 months correlation between Mercury and Eve is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mercury Systems and Eve Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eve Holding 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 Eve Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eve Holding has no effect on the direction of Mercury Systems i.e., Mercury Systems and Eve Holding go up and down completely randomly.

Pair Corralation between Mercury Systems and Eve Holding

Given the investment horizon of 90 days Mercury Systems is expected to generate 0.7 times more return on investment than Eve Holding. However, Mercury Systems is 1.43 times less risky than Eve Holding. It trades about 0.03 of its potential returns per unit of risk. Eve Holding is currently generating about -0.13 per unit of risk. If you would invest  4,200  in Mercury Systems on December 28, 2024 and sell it today you would earn a total of  160.00  from holding Mercury Systems or generate 3.81% return on investment over 90 days.

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

Mercury Systems  vs.  Eve Holding

Mercury Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mercury Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Mercury Systems may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Eve Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eve Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mercury Systems and Eve Holding

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

The idea behind Mercury Systems and Eve Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.