Correlation Between Merchants National and Beaver Coal
Can any of the company-specific risk be diversified away by investing in both Merchants National and Beaver Coal 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 Merchants National and Beaver Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merchants National Properties and Beaver Coal Co, you can compare the effects of market volatilities on Merchants National and Beaver Coal 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 Merchants National with a short position of Beaver Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants National and Beaver Coal.
Diversification Opportunities for Merchants National and Beaver Coal
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Merchants and Beaver is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Merchants National Properties and Beaver Coal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beaver Coal and Merchants National 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 Merchants National Properties are associated (or correlated) with Beaver Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beaver Coal has no effect on the direction of Merchants National i.e., Merchants National and Beaver Coal go up and down completely randomly.
Pair Corralation between Merchants National and Beaver Coal
Given the investment horizon of 90 days Merchants National Properties is expected to generate 0.44 times more return on investment than Beaver Coal. However, Merchants National Properties is 2.25 times less risky than Beaver Coal. It trades about 0.2 of its potential returns per unit of risk. Beaver Coal Co is currently generating about 0.05 per unit of risk. If you would invest 135,901 in Merchants National Properties on November 11, 2024 and sell it today you would earn a total of 44,943 from holding Merchants National Properties or generate 33.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.33% |
| Values | Daily Returns |
Merchants National Properties vs. Beaver Coal Co
Performance |
| Timeline |
| Merchants National |
| Beaver Coal |
Merchants National and Beaver Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merchants National and Beaver Coal
The main advantage of trading using opposite Merchants National and Beaver Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants National position performs unexpectedly, Beaver Coal 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 Beaver Coal will offset losses from the drop in Beaver Coal's long position.The idea behind Merchants National Properties and Beaver Coal Co 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.| Beaver Coal vs. Pinelawn Cemetery | Beaver Coal vs. Pardee Resources Co | Beaver Coal vs. Boswell J G | Beaver Coal vs. Conwest Assoc Part |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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