Correlation Between Mercury Systems and HEICO
Can any of the company-specific risk be diversified away by investing in both Mercury Systems and HEICO 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 Mercury Systems and HEICO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercury Systems and HEICO, you can compare the effects of market volatilities on Mercury Systems and HEICO 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 Mercury Systems with a short position of HEICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercury Systems and HEICO.
Diversification Opportunities for Mercury Systems and HEICO
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mercury and HEICO is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Mercury Systems and HEICO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEICO and Mercury Systems 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 Mercury Systems are associated (or correlated) with HEICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEICO has no effect on the direction of Mercury Systems i.e., Mercury Systems and HEICO go up and down completely randomly.
Pair Corralation between Mercury Systems and HEICO
Given the investment horizon of 90 days Mercury Systems is expected to generate 1.26 times more return on investment than HEICO. However, Mercury Systems is 1.26 times more volatile than HEICO. It trades about 0.25 of its potential returns per unit of risk. HEICO is currently generating about 0.04 per unit of risk. If you would invest 4,030 in Mercury Systems on October 23, 2024 and sell it today you would earn a total of 328.00 from holding Mercury Systems or generate 8.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Mercury Systems vs. HEICO
Performance |
| Timeline |
| Mercury Systems |
| HEICO |
Mercury Systems and HEICO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercury Systems and HEICO
The main advantage of trading using opposite Mercury Systems and HEICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercury Systems position performs unexpectedly, HEICO 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 HEICO will offset losses from the drop in HEICO's long position.| Mercury Systems vs. Curtiss Wright | Mercury Systems vs. Hexcel | Mercury Systems vs. Ducommun Incorporated | Mercury Systems vs. Woodward |
| HEICO vs. Vertical Aerospace | HEICO vs. Rolls Royce Holdings plc | HEICO vs. Embraer SA ADR | HEICO vs. Rocket Lab USA |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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