Correlation Between Mercantile Investment and British American
Can any of the company-specific risk be diversified away by investing in both Mercantile Investment and British American 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 Mercantile Investment and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Mercantile Investment and British American Tobacco, you can compare the effects of market volatilities on Mercantile Investment and British American 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 Mercantile Investment with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Investment and British American.
Diversification Opportunities for Mercantile Investment and British American
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Mercantile and British is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Mercantile Investment 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 The Mercantile Investment are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Mercantile Investment i.e., Mercantile Investment and British American go up and down completely randomly.
Pair Corralation between Mercantile Investment and British American
Assuming the 90 days trading horizon Mercantile Investment is expected to generate 23.75 times less return on investment than British American. But when comparing it to its historical volatility, The Mercantile Investment is 1.15 times less risky than British American. It trades about 0.01 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,961 in British American Tobacco on September 3, 2024 and sell it today you would earn a total of 836.00 from holding British American Tobacco or generate 28.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
The Mercantile Investment vs. British American Tobacco
Performance |
| Timeline |
| The Mercantile Investment |
| British American Tobacco |
Mercantile Investment and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercantile Investment and British American
The main advantage of trading using opposite Mercantile Investment and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Investment position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Mercantile Investment vs. SupplyMe Capital PLC | Mercantile Investment vs. 88 Energy | Mercantile Investment vs. Vodafone Group PLC | Mercantile Investment vs. Vodafone Group PLC |
| British American vs. FC Investment Trust | British American vs. Smithson Investment Trust | British American vs. Westlake Chemical Corp | British American vs. The Mercantile 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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