Correlation Between Admiral Group and Merit Group
Can any of the company-specific risk be diversified away by investing in both Admiral Group and Merit Group 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 Admiral Group and Merit Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Admiral Group PLC and Merit Group PLC, you can compare the effects of market volatilities on Admiral Group and Merit Group 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 Admiral Group with a short position of Merit Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Admiral Group and Merit Group.
Diversification Opportunities for Admiral Group and Merit Group
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Admiral and Merit is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Admiral Group PLC and Merit Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merit Group PLC and Admiral Group 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 Admiral Group PLC are associated (or correlated) with Merit Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merit Group PLC has no effect on the direction of Admiral Group i.e., Admiral Group and Merit Group go up and down completely randomly.
Pair Corralation between Admiral Group and Merit Group
Assuming the 90 days trading horizon Admiral Group PLC is expected to generate 0.46 times more return on investment than Merit Group. However, Admiral Group PLC is 2.17 times less risky than Merit Group. It trades about 0.05 of its potential returns per unit of risk. Merit Group PLC is currently generating about 0.01 per unit of risk. If you would invest 185,543 in Admiral Group PLC on August 26, 2024 and sell it today you would earn a total of 59,457 from holding Admiral Group PLC or generate 32.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Admiral Group PLC vs. Merit Group PLC
Performance |
| Timeline |
| Admiral Group PLC |
| Merit Group PLC |
Admiral Group and Merit Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Admiral Group and Merit Group
The main advantage of trading using opposite Admiral Group and Merit Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Admiral Group position performs unexpectedly, Merit Group 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 Merit Group will offset losses from the drop in Merit Group's long position.| Admiral Group vs. CleanTech Lithium plc | Admiral Group vs. Capital Drilling | Admiral Group vs. Pets at Home | Admiral Group vs. bet at home AG |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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