Correlation Between Mercuries Life and Chung Lien
Can any of the company-specific risk be diversified away by investing in both Mercuries Life and Chung Lien 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 Mercuries Life and Chung Lien into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercuries Life Insurance and Chung Lien Transportation, you can compare the effects of market volatilities on Mercuries Life and Chung Lien 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 Mercuries Life with a short position of Chung Lien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercuries Life and Chung Lien.
Diversification Opportunities for Mercuries Life and Chung Lien
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mercuries and Chung is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Mercuries Life Insurance and Chung Lien Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Lien Transportation and Mercuries Life 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 Mercuries Life Insurance are associated (or correlated) with Chung Lien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Lien Transportation has no effect on the direction of Mercuries Life i.e., Mercuries Life and Chung Lien go up and down completely randomly.
Pair Corralation between Mercuries Life and Chung Lien
Assuming the 90 days trading horizon Mercuries Life Insurance is expected to generate 2.05 times more return on investment than Chung Lien. However, Mercuries Life is 2.05 times more volatile than Chung Lien Transportation. It trades about 0.02 of its potential returns per unit of risk. Chung Lien Transportation is currently generating about -0.04 per unit of risk. If you would invest 579.00 in Mercuries Life Insurance on September 3, 2024 and sell it today you would earn a total of 81.00 from holding Mercuries Life Insurance or generate 13.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercuries Life Insurance vs. Chung Lien Transportation
Performance |
| Timeline |
| Mercuries Life Insurance |
| Chung Lien Transportation |
Mercuries Life and Chung Lien Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercuries Life and Chung Lien
The main advantage of trading using opposite Mercuries Life and Chung Lien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercuries Life position performs unexpectedly, Chung Lien 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 Chung Lien will offset losses from the drop in Chung Lien's long position.| Mercuries Life vs. Central Reinsurance Corp | Mercuries Life vs. Huaku Development Co | Mercuries Life vs. Chailease Holding Co | Mercuries Life vs. CTBC Financial Holding |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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