Correlation Between Premier African and Mercantile Investment
Can any of the company-specific risk be diversified away by investing in both Premier African and Mercantile Investment 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 Premier African and Mercantile Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier African Minerals and The Mercantile Investment, you can compare the effects of market volatilities on Premier African and Mercantile Investment 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 Premier African with a short position of Mercantile Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier African and Mercantile Investment.
Diversification Opportunities for Premier African and Mercantile Investment
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Premier and Mercantile is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Premier African Minerals and The Mercantile Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Mercantile Investment and Premier African 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 Premier African Minerals are associated (or correlated) with Mercantile Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Mercantile Investment has no effect on the direction of Premier African i.e., Premier African and Mercantile Investment go up and down completely randomly.
Pair Corralation between Premier African and Mercantile Investment
Assuming the 90 days trading horizon Premier African Minerals is expected to generate 15.03 times more return on investment than Mercantile Investment. However, Premier African is 15.03 times more volatile than The Mercantile Investment. It trades about 0.17 of its potential returns per unit of risk. The Mercantile Investment is currently generating about 0.07 per unit of risk. If you would invest 4.05 in Premier African Minerals on September 5, 2024 and sell it today you would earn a total of 1.80 from holding Premier African Minerals or generate 44.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Premier African Minerals vs. The Mercantile Investment
Performance |
| Timeline |
| Premier African Minerals |
| The Mercantile Investment |
Premier African and Mercantile Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier African and Mercantile Investment
The main advantage of trading using opposite Premier African and Mercantile Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier African position performs unexpectedly, Mercantile Investment 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 Mercantile Investment will offset losses from the drop in Mercantile Investment's long position.| Premier African vs. Antofagasta PLC | Premier African vs. Atalaya Mining | Premier African vs. Ferrexpo PLC | Premier African vs. Amaroq Minerals |
| Mercantile Investment vs. SupplyMe Capital PLC | Mercantile Investment vs. Lloyds Banking Group | Mercantile Investment vs. Premier African Minerals | Mercantile Investment vs. SANTANDER UK 8 |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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