Correlation Between Young Cos and Mercantile Investment
Can any of the company-specific risk be diversified away by investing in both Young Cos 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 Young Cos and Mercantile Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Young Cos Brewery and The Mercantile Investment, you can compare the effects of market volatilities on Young Cos 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 Young Cos with a short position of Mercantile Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Young Cos and Mercantile Investment.
Diversification Opportunities for Young Cos and Mercantile Investment
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Young and Mercantile is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Young Cos Brewery 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 Young Cos 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 Young Cos Brewery 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 Young Cos i.e., Young Cos and Mercantile Investment go up and down completely randomly.
Pair Corralation between Young Cos and Mercantile Investment
Assuming the 90 days trading horizon Young Cos Brewery is expected to generate 1.09 times more return on investment than Mercantile Investment. However, Young Cos is 1.09 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 0.11 per unit of risk. If you would invest 61,472 in Young Cos Brewery on September 1, 2024 and sell it today you would earn a total of 2,328 from holding Young Cos Brewery or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Young Cos Brewery vs. The Mercantile Investment
Performance |
| Timeline |
| Young Cos Brewery |
| The Mercantile Investment |
Young Cos and Mercantile Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Young Cos and Mercantile Investment
The main advantage of trading using opposite Young Cos and Mercantile Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Young Cos 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.| Young Cos vs. DFS Furniture PLC | Young Cos vs. Beeks Trading | Young Cos vs. Inspiration Healthcare Group | Young Cos vs. Naturhouse Health SA |
| Mercantile Investment vs. Young Cos Brewery | Mercantile Investment vs. Liontrust Asset Management | Mercantile Investment vs. Cizzle Biotechnology Holdings | Mercantile Investment vs. Coor Service Management |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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