Correlation Between Mcphy Energy and Mersen SA

Can any of the company-specific risk be diversified away by investing in both Mcphy Energy and Mersen SA 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 Mcphy Energy and Mersen SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mcphy Energy and Mersen SA, you can compare the effects of market volatilities on Mcphy Energy and Mersen SA 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 Mcphy Energy with a short position of Mersen SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mcphy Energy and Mersen SA.

Diversification Opportunities for Mcphy Energy and Mersen SA

-0.41

Correlation Coefficient

Mcphy Energy  Mersen SA

Very good diversification

The 3 months correlation between Mcphy and Mersen is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Mcphy Energy and Mersen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mersen SA and Mcphy Energy 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 Mcphy Energy are associated (or correlated) with Mersen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mersen SA has no effect on the direction of Mcphy Energy i.e., Mcphy Energy and Mersen SA go up and down completely randomly.

Pair Corralation between Mcphy Energy and Mersen SA

Assuming the 90 days trading horizon Mcphy Energy is expected to generate 4.51 times more return on investment than Mersen SA. However, Mcphy Energy is 4.51 times more volatile than Mersen SA. It trades about 0.05 of its potential returns per unit of risk. Mersen SA is currently generating about -0.02 per unit of risk. If you would invest  199.00  in Mcphy Energy on February 1, 2024 and sell it today you would earn a total of  9.00  from holding Mcphy Energy or generate 4.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Mcphy Energy  vs.  Mersen SA

Mcphy Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mcphy Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Mersen SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mersen SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mersen SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mcphy Energy and Mersen SA

The main advantage of trading using opposite Mcphy Energy and Mersen SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mcphy Energy position performs unexpectedly, Mersen SA 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 Mersen SA will offset losses from the drop in Mersen SA's long position.

The idea behind Mcphy Energy and Mersen SA 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.