Correlation Between Argan SA and Mercialys
Can any of the company-specific risk be diversified away by investing in both Argan SA and Mercialys 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 Argan SA and Mercialys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Argan SA and Mercialys SA, you can compare the effects of market volatilities on Argan SA and Mercialys 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 Argan SA with a short position of Mercialys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argan SA and Mercialys.
Diversification Opportunities for Argan SA and Mercialys
Very poor diversification
The 3 months correlation between Argan and Mercialys is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Argan SA and Mercialys SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercialys SA and Argan SA 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 Argan SA are associated (or correlated) with Mercialys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercialys SA has no effect on the direction of Argan SA i.e., Argan SA and Mercialys go up and down completely randomly.
Pair Corralation between Argan SA and Mercialys
Assuming the 90 days trading horizon Argan SA is expected to generate 51.91 times less return on investment than Mercialys. In addition to that, Argan SA is 1.16 times more volatile than Mercialys SA. It trades about 0.0 of its total potential returns per unit of risk. Mercialys SA is currently generating about 0.08 per unit of volatility. If you would invest 705.00 in Mercialys SA on August 31, 2024 and sell it today you would earn a total of 343.00 from holding Mercialys SA or generate 48.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Argan SA vs. Mercialys SA
Performance |
| Timeline |
| Argan SA |
| Mercialys SA |
Argan SA and Mercialys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Argan SA and Mercialys
The main advantage of trading using opposite Argan SA and Mercialys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argan SA position performs unexpectedly, Mercialys 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 Mercialys will offset losses from the drop in Mercialys' long position.The idea behind Argan SA and Mercialys SA 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.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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