Correlation Between Mercer International and Big Tree
Can any of the company-specific risk be diversified away by investing in both Mercer International and Big Tree 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 Mercer International and Big Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercer International and Big Tree Cloud, you can compare the effects of market volatilities on Mercer International and Big Tree 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 Mercer International with a short position of Big Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercer International and Big Tree.
Diversification Opportunities for Mercer International and Big Tree
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mercer and Big is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Mercer International and Big Tree Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Tree Cloud and Mercer International 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 Mercer International are associated (or correlated) with Big Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Tree Cloud has no effect on the direction of Mercer International i.e., Mercer International and Big Tree go up and down completely randomly.
Pair Corralation between Mercer International and Big Tree
Given the investment horizon of 90 days Mercer International is expected to under-perform the Big Tree. But the stock apears to be less risky and, when comparing its historical volatility, Mercer International is 6.68 times less risky than Big Tree. The stock trades about -0.03 of its potential returns per unit of risk. The Big Tree Cloud is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5.22 in Big Tree Cloud on September 3, 2024 and sell it today you would lose (1.44) from holding Big Tree Cloud or give up 27.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 83.43% |
| Values | Daily Returns |
Mercer International vs. Big Tree Cloud
Performance |
| Timeline |
| Mercer International |
| Big Tree Cloud |
Mercer International and Big Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercer International and Big Tree
The main advantage of trading using opposite Mercer International and Big Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercer International position performs unexpectedly, Big Tree 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 Big Tree will offset losses from the drop in Big Tree's long position.| Mercer International vs. Sylvamo Corp | Mercer International vs. Suzano Papel e | Mercer International vs. UPM Kymmene Oyj | Mercer International vs. Clearwater Paper |
| Big Tree vs. Apogee Therapeutics, Common | Big Tree vs. Centessa Pharmaceuticals PLC | Big Tree vs. Chimerix | Big Tree vs. Ardelyx |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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