Correlation Between Mercantile Investment and Inchcape PLC
Can any of the company-specific risk be diversified away by investing in both Mercantile Investment and Inchcape 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 Inchcape 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 Inchcape PLC, you can compare the effects of market volatilities on Mercantile Investment and Inchcape 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 Inchcape PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercantile Investment and Inchcape PLC.
Diversification Opportunities for Mercantile Investment and Inchcape PLC
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mercantile and Inchcape is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Mercantile Investment and Inchcape PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inchcape 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 Inchcape PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inchcape PLC has no effect on the direction of Mercantile Investment i.e., Mercantile Investment and Inchcape PLC go up and down completely randomly.
Pair Corralation between Mercantile Investment and Inchcape PLC
Assuming the 90 days trading horizon Mercantile Investment is expected to generate 1.52 times less return on investment than Inchcape PLC. But when comparing it to its historical volatility, The Mercantile Investment is 1.54 times less risky than Inchcape PLC. It trades about 0.04 of its potential returns per unit of risk. Inchcape PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 67,105 in Inchcape PLC on September 14, 2024 and sell it today you would earn a total of 10,845 from holding Inchcape PLC or generate 16.16% 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. Inchcape PLC
Performance |
| Timeline |
| The Mercantile Investment |
| Inchcape PLC |
Mercantile Investment and Inchcape PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercantile Investment and Inchcape PLC
The main advantage of trading using opposite Mercantile Investment and Inchcape PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercantile Investment position performs unexpectedly, Inchcape 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 Inchcape PLC will offset losses from the drop in Inchcape PLC's long position.| Mercantile Investment vs. Catalyst Media Group | Mercantile Investment vs. CATLIN GROUP | Mercantile Investment vs. Tamburi Investment Partners | Mercantile Investment vs. Magnora ASA |
| Inchcape PLC vs. Zurich Insurance Group | Inchcape PLC vs. Wizz Air Holdings | Inchcape PLC vs. Cairo Communication SpA | Inchcape PLC vs. Verizon Communications |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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