Correlation Between C Mer and Electra

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

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

Diversification Opportunities for C Mer and Electra

0.86

Correlation Coefficient

C Mer  Electra

Very poor diversification

The 3 months correlation between CMER and Electra is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding C Mer Industries and Electra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra and C Mer 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 C Mer Industries are associated (or correlated) with Electra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra has no effect on the direction of C Mer i.e., C Mer and Electra go up and down completely randomly.

Pair Corralation between C Mer and Electra

Assuming the 90 days trading horizon C Mer Industries is expected to generate 1.86 times more return on investment than Electra. However, C Mer is 1.86 times more volatile than Electra. It trades about 0.26 of its potential returns per unit of risk. Electra is currently generating about 0.32 per unit of risk. If you would invest  189,700  in C Mer Industries on September 28, 2024 and sell it today you would earn a total of  111,700  from holding C Mer Industries or generate 58.88% return on investment over 90 days.

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

C Mer Industries  vs.  Electra

C Mer Industries

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in C Mer Industries are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, C Mer sustained solid returns over the last few months and may actually be approaching a breakup point.

Electra

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Electra are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Electra sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with C Mer and Electra

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

The idea behind C Mer Industries and Electra 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.