Correlation Between BP Plastics and Mercury Industries
Can any of the company-specific risk be diversified away by investing in both BP Plastics and Mercury Industries 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 BP Plastics and Mercury Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP Plastics Holding and Mercury Industries Bhd, you can compare the effects of market volatilities on BP Plastics and Mercury Industries 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 BP Plastics with a short position of Mercury Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plastics and Mercury Industries.
Diversification Opportunities for BP Plastics and Mercury Industries
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between 5100 and Mercury is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding BP Plastics Holding and Mercury Industries Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Industries Bhd and BP Plastics 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 BP Plastics Holding are associated (or correlated) with Mercury Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Industries Bhd has no effect on the direction of BP Plastics i.e., BP Plastics and Mercury Industries go up and down completely randomly.
Pair Corralation between BP Plastics and Mercury Industries
Assuming the 90 days trading horizon BP Plastics is expected to generate 2.1 times less return on investment than Mercury Industries. But when comparing it to its historical volatility, BP Plastics Holding is 2.32 times less risky than Mercury Industries. It trades about 0.02 of its potential returns per unit of risk. Mercury Industries Bhd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 93.00 in Mercury Industries Bhd on September 1, 2024 and sell it today you would earn a total of 1.00 from holding Mercury Industries Bhd or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.86% |
| Values | Daily Returns |
BP Plastics Holding vs. Mercury Industries Bhd
Performance |
| Timeline |
| BP Plastics Holding |
| Mercury Industries Bhd |
BP Plastics and Mercury Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plastics and Mercury Industries
The main advantage of trading using opposite BP Plastics and Mercury Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plastics position performs unexpectedly, Mercury Industries 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 Industries will offset losses from the drop in Mercury Industries' long position.| BP Plastics vs. Press Metal Bhd | BP Plastics vs. Central Industrial Corp | BP Plastics vs. Cosmos Technology International | BP Plastics vs. Binasat Communications Bhd |
| Mercury Industries vs. JAKS Resources Bhd | Mercury Industries vs. PESTECH International Bhd | Mercury Industries vs. Tadmax Resources Berhad | Mercury Industries vs. Ho Hup Construction |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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