Correlation Between PM Capital and Mercury NZ

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

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

Diversification Opportunities for PM Capital and Mercury NZ

0.65

Correlation Coefficient

PM Capital  Mercury NZ

Poor diversification

The 3 months correlation between PGF and Mercury is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PM Capital Global and Mercury NZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury NZ and PM Capital 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 PM Capital Global are associated (or correlated) with Mercury NZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury NZ has no effect on the direction of PM Capital i.e., PM Capital and Mercury NZ go up and down completely randomly.

Pair Corralation between PM Capital and Mercury NZ

Assuming the 90 days trading horizon PM Capital Global is expected to generate 0.51 times more return on investment than Mercury NZ. However, PM Capital Global is 1.98 times less risky than Mercury NZ. It trades about 0.06 of its potential returns per unit of risk. Mercury NZ is currently generating about 0.02 per unit of risk. If you would invest  162.00  in PM Capital Global on October 23, 2024 and sell it today you would earn a total of  65.00  from holding PM Capital Global or generate 40.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

PM Capital Global  vs.  Mercury NZ

PM Capital Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PM Capital Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, PM Capital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Mercury NZ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercury NZ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PM Capital and Mercury NZ

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

The idea behind PM Capital Global and Mercury NZ 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.