Correlation Between Mercator Medical and Globe Trade

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

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

Diversification Opportunities for Mercator Medical and Globe Trade

-0.16

Correlation Coefficient

Mercator Medical  Globe Trade

Good diversification

The 3 months correlation between Mercator and Globe is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Mercator Medical SA and Globe Trade Centre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Trade Centre and Mercator Medical 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 Mercator Medical SA are associated (or correlated) with Globe Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Trade Centre has no effect on the direction of Mercator Medical i.e., Mercator Medical and Globe Trade go up and down completely randomly.

Pair Corralation between Mercator Medical and Globe Trade

Assuming the 90 days trading horizon Mercator Medical SA is expected to under-perform the Globe Trade. In addition to that, Mercator Medical is 1.18 times more volatile than Globe Trade Centre. It trades about -0.09 of its total potential returns per unit of risk. Globe Trade Centre is currently generating about 0.03 per unit of volatility. If you would invest  413.00  in Globe Trade Centre on September 3, 2024 and sell it today you would earn a total of  13.00  from holding Globe Trade Centre or generate 3.15% return on investment over 90 days.

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

Mercator Medical SA  vs.  Globe Trade Centre

Mercator Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercator Medical SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Globe Trade Centre

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Globe Trade Centre are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Globe Trade is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Mercator Medical and Globe Trade

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

The idea behind Mercator Medical SA and Globe Trade Centre 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.