Correlation Between Advocate Capital and MerlynAI Corp

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

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

Diversification Opportunities for Advocate Capital and MerlynAI Corp

0.83

Correlation Coefficient

Advocate Capital  MerlynAI Corp

Very poor diversification

The 3 months correlation between Advocate and MerlynAI is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Advocate Capital Management and MerlynAI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MerlynAI Corp and Advocate 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 Advocate Capital Management are associated (or correlated) with MerlynAI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MerlynAI Corp has no effect on the direction of Advocate Capital i.e., Advocate Capital and MerlynAI Corp go up and down completely randomly.

Pair Corralation between Advocate Capital and MerlynAI Corp

Considering the 90-day investment horizon Advocate Capital Management is expected to under-perform the MerlynAI Corp. In addition to that, Advocate Capital is 3.7 times more volatile than MerlynAI Corp. It trades about -0.01 of its total potential returns per unit of risk. MerlynAI Corp is currently generating about 0.07 per unit of volatility. If you would invest  2,749  in MerlynAI Corp on September 20, 2024 and sell it today you would earn a total of  203.00  from holding MerlynAI Corp or generate 7.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Advocate Capital Management  vs.  MerlynAI Corp

Advocate Capital Man

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advocate Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Advocate Capital is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

MerlynAI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MerlynAI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, MerlynAI Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Advocate Capital and MerlynAI Corp

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

The idea behind Advocate Capital Management and MerlynAI Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.