Correlation Between Mercantile Investment and Elmos Semiconductor

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

By analyzing existing cross correlation between The Mercantile Investment and Elmos Semiconductor SE, you can compare the effects of market volatilities on Mercantile Investment and Elmos Semiconductor 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 Mercantile Investment with a short position of Elmos Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Investment and Elmos Semiconductor.

Diversification Opportunities for Mercantile Investment and Elmos Semiconductor

0.29

Correlation Coefficient

Mercantile Investment  Elmos Semiconductor

Modest diversification

The 3 months correlation between Mercantile and Elmos is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment and Elmos Semiconductor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmos Semiconductor and Mercantile Investment 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 The Mercantile Investment are associated (or correlated) with Elmos Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmos Semiconductor has no effect on the direction of Mercantile Investment i.e., Mercantile Investment and Elmos Semiconductor go up and down completely randomly.

Pair Corralation between Mercantile Investment and Elmos Semiconductor

Assuming the 90 days trading horizon Mercantile Investment is expected to generate 1.91 times less return on investment than Elmos Semiconductor. But when comparing it to its historical volatility, The Mercantile Investment is 2.29 times less risky than Elmos Semiconductor. It trades about 0.04 of its potential returns per unit of risk. Elmos Semiconductor SE is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,405  in Elmos Semiconductor SE on September 19, 2024 and sell it today you would earn a total of  1,515  from holding Elmos Semiconductor SE or generate 28.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

The Mercantile Investment  vs.  Elmos Semiconductor SE

The Mercantile Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Mercantile Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Mercantile Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Elmos Semiconductor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elmos Semiconductor SE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Elmos Semiconductor is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mercantile Investment and Elmos Semiconductor

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

The idea behind The Mercantile Investment and Elmos Semiconductor SE 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.