Correlation Between Mercury General and Kemper

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

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

Diversification Opportunities for Mercury General and Kemper

0.93

Correlation Coefficient

Mercury General  Kemper

Almost no diversification

The 3 months correlation between Mercury and Kemper is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Mercury General and Kemper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kemper and Mercury General 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 Mercury General are associated (or correlated) with Kemper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kemper has no effect on the direction of Mercury General i.e., Mercury General and Kemper go up and down completely randomly.

Pair Corralation between Mercury General and Kemper

Considering the 90-day investment horizon Mercury General is expected to generate 1.51 times more return on investment than Kemper. However, Mercury General is 1.51 times more volatile than Kemper. It trades about 0.17 of its potential returns per unit of risk. Kemper is currently generating about 0.15 per unit of risk. If you would invest  6,365  in Mercury General on September 3, 2024 and sell it today you would earn a total of  1,531  from holding Mercury General or generate 24.05% return on investment over 90 days.

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

Mercury General  vs.  Kemper

Mercury General

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mercury General are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, Mercury General showed solid returns over the last few months and may actually be approaching a breakup point.

Kemper

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kemper are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Kemper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mercury General and Kemper

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

The idea behind Mercury General and Kemper 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.