Correlation Between Triumph and Mercury Systems

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

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

Diversification Opportunities for Triumph and Mercury Systems

0.56

Correlation Coefficient

Triumph  Mercury Systems

Very weak diversification

The 3 months correlation between Triumph and Mercury is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Triumph Group and Mercury Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Systems and Triumph 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 Triumph Group are associated (or correlated) with Mercury Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Systems has no effect on the direction of Triumph i.e., Triumph and Mercury Systems go up and down completely randomly.

Pair Corralation between Triumph and Mercury Systems

Considering the 90-day investment horizon Triumph Group is expected to generate 1.23 times more return on investment than Mercury Systems. However, Triumph is 1.23 times more volatile than Mercury Systems. It trades about 0.13 of its potential returns per unit of risk. Mercury Systems is currently generating about 0.05 per unit of risk. If you would invest  1,393  in Triumph Group on August 30, 2024 and sell it today you would earn a total of  484.00  from holding Triumph Group or generate 34.75% return on investment over 90 days.

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

Triumph Group  vs.  Mercury Systems

Triumph Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Triumph Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Triumph demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Triumph and Mercury Systems

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

The idea behind Triumph Group and Mercury Systems 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.