Correlation Between Mercantile Investment and Caffyns PLC
Can any of the company-specific risk be diversified away by investing in both Mercantile Investment and Caffyns PLC 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 Caffyns PLC 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 Caffyns PLC, you can compare the effects of market volatilities on Mercantile Investment and Caffyns PLC 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 Caffyns PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Investment and Caffyns PLC.
Diversification Opportunities for Mercantile Investment and Caffyns PLC
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Mercantile and Caffyns is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment and Caffyns PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caffyns PLC 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 Caffyns PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caffyns PLC has no effect on the direction of Mercantile Investment i.e., Mercantile Investment and Caffyns PLC go up and down completely randomly.
Pair Corralation between Mercantile Investment and Caffyns PLC
Assuming the 90 days trading horizon The Mercantile Investment is expected to generate 1.01 times more return on investment than Caffyns PLC. However, Mercantile Investment is 1.01 times more volatile than Caffyns PLC. It trades about -0.07 of its potential returns per unit of risk. Caffyns PLC is currently generating about -0.21 per unit of risk. If you would invest 24,000 in The Mercantile Investment on August 29, 2024 and sell it today you would lose (500.00) from holding The Mercantile Investment or give up 2.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Mercantile Investment vs. Caffyns PLC
Performance |
| Timeline |
| The Mercantile Investment |
| Caffyns PLC |
Mercantile Investment and Caffyns PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercantile Investment and Caffyns PLC
The main advantage of trading using opposite Mercantile Investment and Caffyns PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Investment position performs unexpectedly, Caffyns PLC 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 Caffyns PLC will offset losses from the drop in Caffyns PLC's long position.| Mercantile Investment vs. LPKF Laser Electronics | Mercantile Investment vs. Gaming Realms plc | Mercantile Investment vs. Compal Electronics GDR | Mercantile Investment vs. Flow Traders NV |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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