Correlation Between OFX Group and Armada Mercantile

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

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

Diversification Opportunities for OFX Group and Armada Mercantile

0.02

Correlation Coefficient

OFX Group  Armada Mercantile

Significant diversification

The 3 months correlation between OFX and Armada is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding OFX Group Ltd and Armada Mercantile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armada Mercantile and OFX Group 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 OFX Group Ltd are associated (or correlated) with Armada Mercantile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armada Mercantile has no effect on the direction of OFX Group i.e., OFX Group and Armada Mercantile go up and down completely randomly.

Pair Corralation between OFX Group and Armada Mercantile

Assuming the 90 days horizon OFX Group Ltd is expected to under-perform the Armada Mercantile. But the pink sheet apears to be less risky and, when comparing its historical volatility, OFX Group Ltd is 9.03 times less risky than Armada Mercantile. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Armada Mercantile is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Armada Mercantile on December 28, 2024 and sell it today you would lose (7.00) from holding Armada Mercantile or give up 23.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

OFX Group Ltd  vs.  Armada Mercantile

OFX Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days OFX Group Ltd 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 basic 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.

Armada Mercantile

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Armada Mercantile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Armada Mercantile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OFX Group and Armada Mercantile

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

The idea behind OFX Group Ltd and Armada Mercantile 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.