Correlation Between Mersen SA and BigBen Interactive
Can any of the company-specific risk be diversified away by investing in both Mersen SA and BigBen Interactive 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 Mersen SA and BigBen Interactive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mersen SA and BigBen Interactive, you can compare the effects of market volatilities on Mersen SA and BigBen Interactive 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 Mersen SA with a short position of BigBen Interactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mersen SA and BigBen Interactive.
Diversification Opportunities for Mersen SA and BigBen Interactive
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mersen and BigBen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Mersen SA and BigBen Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BigBen Interactive and Mersen SA 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 Mersen SA are associated (or correlated) with BigBen Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BigBen Interactive has no effect on the direction of Mersen SA i.e., Mersen SA and BigBen Interactive go up and down completely randomly.
Pair Corralation between Mersen SA and BigBen Interactive
Assuming the 90 days trading horizon Mersen SA is expected to generate 1.22 times more return on investment than BigBen Interactive. However, Mersen SA is 1.22 times more volatile than BigBen Interactive. It trades about -0.16 of its potential returns per unit of risk. BigBen Interactive is currently generating about -0.72 per unit of risk. If you would invest 2,155 in Mersen SA on August 31, 2024 and sell it today you would lose (171.00) from holding Mersen SA or give up 7.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mersen SA vs. BigBen Interactive
Performance |
| Timeline |
| Mersen SA |
| BigBen Interactive |
Mersen SA and BigBen Interactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mersen SA and BigBen Interactive
The main advantage of trading using opposite Mersen SA and BigBen Interactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mersen SA position performs unexpectedly, BigBen Interactive 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 BigBen Interactive will offset losses from the drop in BigBen Interactive's long position.The idea behind Mersen SA and BigBen Interactive pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| BigBen Interactive vs. Nacon Sa | BigBen Interactive vs. Chargeurs SA | BigBen Interactive vs. Claranova SE | BigBen Interactive vs. Trigano SA |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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