Correlation Between Carmila SA and Mercialys

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

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

Diversification Opportunities for Carmila SA and Mercialys

0.69

Correlation Coefficient

Carmila SA  Mercialys

Poor diversification

The 3 months correlation between Carmila and Mercialys is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Carmila SA and Mercialys SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercialys SA and Carmila SA 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 Carmila SA are associated (or correlated) with Mercialys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercialys SA has no effect on the direction of Carmila SA i.e., Carmila SA and Mercialys go up and down completely randomly.

Pair Corralation between Carmila SA and Mercialys

Assuming the 90 days trading horizon Carmila SA is expected to generate 0.76 times more return on investment than Mercialys. However, Carmila SA is 1.31 times less risky than Mercialys. It trades about -0.02 of its potential returns per unit of risk. Mercialys SA is currently generating about -0.12 per unit of risk. If you would invest  1,674  in Carmila SA on September 3, 2024 and sell it today you would lose (24.00) from holding Carmila SA or give up 1.43% of portfolio value over 90 days.

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

Carmila SA  vs.  Mercialys SA

Carmila SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmila SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Carmila SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mercialys SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercialys SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Carmila SA and Mercialys

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

The idea behind Carmila SA and Mercialys SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.