Correlation Between Mercantile Investment and Cornish Metals

Can any of the company-specific risk be diversified away by investing in both Mercantile Investment and Cornish Metals 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 Cornish Metals 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 Cornish Metals, you can compare the effects of market volatilities on Mercantile Investment and Cornish Metals 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 Cornish Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Investment and Cornish Metals.

Diversification Opportunities for Mercantile Investment and Cornish Metals

-0.35

Correlation Coefficient

Mercantile Investment  Cornish Metals

Very good diversification

The 3 months correlation between Mercantile and Cornish is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment and Cornish Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornish Metals 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 Cornish Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornish Metals has no effect on the direction of Mercantile Investment i.e., Mercantile Investment and Cornish Metals go up and down completely randomly.

Pair Corralation between Mercantile Investment and Cornish Metals

Assuming the 90 days trading horizon The Mercantile Investment is expected to under-perform the Cornish Metals. But the stock apears to be less risky and, when comparing its historical volatility, The Mercantile Investment is 3.45 times less risky than Cornish Metals. The stock trades about -0.1 of its potential returns per unit of risk. The Cornish Metals is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  640.00  in Cornish Metals on September 22, 2024 and sell it today you would earn a total of  225.00  from holding Cornish Metals or generate 35.16% return on investment over 90 days.

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

The Mercantile Investment  vs.  Cornish Metals

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Cornish Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cornish Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cornish Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mercantile Investment and Cornish Metals

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

The idea behind The Mercantile Investment and Cornish Metals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.