Correlation Between CG Hi and Mercury
Can any of the company-specific risk be diversified away by investing in both CG Hi and Mercury 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 CG Hi and Mercury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CG Hi Tech and Mercury, you can compare the effects of market volatilities on CG Hi and Mercury 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 CG Hi with a short position of Mercury. Check out your portfolio center. Please also check ongoing floating volatility patterns of CG Hi and Mercury.
Diversification Opportunities for CG Hi and Mercury
Very good diversification
The 3 months correlation between 264660 and Mercury is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding CG Hi Tech and Mercury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury and CG Hi 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 CG Hi Tech are associated (or correlated) with Mercury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury has no effect on the direction of CG Hi i.e., CG Hi and Mercury go up and down completely randomly.
Pair Corralation between CG Hi and Mercury
Assuming the 90 days trading horizon CG Hi Tech is expected to under-perform the Mercury. But the stock apears to be less risky and, when comparing its historical volatility, CG Hi Tech is 1.5 times less risky than Mercury. The stock trades about -0.03 of its potential returns per unit of risk. The Mercury is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 508,000 in Mercury on September 12, 2024 and sell it today you would lose (183,000) from holding Mercury or give up 36.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.69% |
| Values | Daily Returns |
CG Hi Tech vs. Mercury
Performance |
| Timeline |
| CG Hi Tech |
| Mercury |
CG Hi and Mercury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CG Hi and Mercury
The main advantage of trading using opposite CG Hi and Mercury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CG Hi position performs unexpectedly, Mercury 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 Mercury will offset losses from the drop in Mercury's long position.The idea behind CG Hi Tech and Mercury 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.| Mercury vs. Eagon Industrial Co | Mercury vs. CG Hi Tech | Mercury vs. Daishin Information Communications | Mercury vs. Nice Information Telecommunication |
Check out your portfolio center.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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