Correlation Between Mercantile Investment and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Mercantile Investment and Auto Trader 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 Auto Trader 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 Auto Trader Group, you can compare the effects of market volatilities on Mercantile Investment and Auto Trader 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 Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Investment and Auto Trader.
Diversification Opportunities for Mercantile Investment and Auto Trader
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mercantile and Auto is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Mercantile Investment i.e., Mercantile Investment and Auto Trader go up and down completely randomly.
Pair Corralation between Mercantile Investment and Auto Trader
Assuming the 90 days trading horizon Mercantile Investment is expected to generate 1.79 times less return on investment than Auto Trader. But when comparing it to its historical volatility, The Mercantile Investment is 1.25 times less risky than Auto Trader. It trades about 0.05 of its potential returns per unit of risk. Auto Trader Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 59,697 in Auto Trader Group on August 31, 2024 and sell it today you would earn a total of 24,203 from holding Auto Trader Group or generate 40.54% 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. Auto Trader Group
Performance |
| Timeline |
| The Mercantile Investment |
| Auto Trader Group |
Mercantile Investment and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercantile Investment and Auto Trader
The main advantage of trading using opposite Mercantile Investment and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Investment position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Mercantile Investment vs. Samsung Electronics Co | Mercantile Investment vs. Samsung Electronics Co | Mercantile Investment vs. Hyundai Motor | Mercantile Investment vs. Toyota Motor Corp |
| Auto Trader vs. Infrastrutture Wireless Italiane | Auto Trader vs. European Metals Holdings | Auto Trader vs. Gamma Communications PLC | Auto Trader vs. Empire Metals Limited |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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