Correlation Between Mercantile Investment and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Mercantile Investment and STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics NV, you can compare the effects of market volatilities on Mercantile Investment and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Investment and STMicroelectronics.
Diversification Opportunities for Mercantile Investment and STMicroelectronics
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mercantile and STMicroelectronics is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Mercantile Investment i.e., Mercantile Investment and STMicroelectronics go up and down completely randomly.
Pair Corralation between Mercantile Investment and STMicroelectronics
Assuming the 90 days trading horizon The Mercantile Investment is expected to generate 0.39 times more return on investment than STMicroelectronics. However, The Mercantile Investment is 2.57 times less risky than STMicroelectronics. It trades about 0.05 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.04 per unit of risk. If you would invest 23,550 in The Mercantile Investment on September 2, 2024 and sell it today you would earn a total of 200.00 from holding The Mercantile Investment or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Mercantile Investment vs. STMicroelectronics NV
Performance |
| Timeline |
| The Mercantile Investment |
| STMicroelectronics |
Mercantile Investment and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercantile Investment and STMicroelectronics
The main advantage of trading using opposite Mercantile Investment and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Investment position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Mercantile Investment vs. Lords Grp Trading | Mercantile Investment vs. Hansa Investment | Mercantile Investment vs. Verizon Communications | Mercantile Investment vs. The Investment |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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