Correlation Between NYSE Composite and Mercato Partners

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Mercato Partners 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 NYSE Composite and Mercato Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Mercato Partners Acquisition, you can compare the effects of market volatilities on NYSE Composite and Mercato Partners 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 NYSE Composite with a short position of Mercato Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Mercato Partners.

Diversification Opportunities for NYSE Composite and Mercato Partners

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between NYSE and Mercato is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Mercato Partners Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercato Partners Acq and NYSE Composite 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 NYSE Composite are associated (or correlated) with Mercato Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercato Partners Acq has no effect on the direction of NYSE Composite i.e., NYSE Composite and Mercato Partners go up and down completely randomly.
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Pair Corralation between NYSE Composite and Mercato Partners

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.67 times more return on investment than Mercato Partners. However, NYSE Composite is 1.5 times less risky than Mercato Partners. It trades about 0.08 of its potential returns per unit of risk. Mercato Partners Acquisition is currently generating about 0.0 per unit of risk. If you would invest  1,521,955  in NYSE Composite on September 11, 2024 and sell it today you would earn a total of  478,671  from holding NYSE Composite or generate 31.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy28.14%
ValuesDaily Returns

NYSE Composite  vs.  Mercato Partners Acquisition

 Performance 
       Timeline  

NYSE Composite and Mercato Partners Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and Mercato Partners

The main advantage of trading using opposite NYSE Composite and Mercato Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Mercato Partners 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 Mercato Partners will offset losses from the drop in Mercato Partners' long position.
The idea behind NYSE Composite and Mercato Partners Acquisition 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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