Correlation Between Neo Neon and Mercuries Life

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Can any of the company-specific risk be diversified away by investing in both Neo Neon and Mercuries Life 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 Neo Neon and Mercuries Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neo Neon Holdings Limited and Mercuries Life Insurance, you can compare the effects of market volatilities on Neo Neon and Mercuries Life 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 Neo Neon with a short position of Mercuries Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neo Neon and Mercuries Life.

Diversification Opportunities for Neo Neon and Mercuries Life

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between Neo and Mercuries is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Neo Neon Holdings Limited and Mercuries Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercuries Life Insurance and Neo Neon 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 Neo Neon Holdings Limited are associated (or correlated) with Mercuries Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercuries Life Insurance has no effect on the direction of Neo Neon i.e., Neo Neon and Mercuries Life go up and down completely randomly.

Pair Corralation between Neo Neon and Mercuries Life

Assuming the 90 days trading horizon Neo Neon Holdings Limited is expected to under-perform the Mercuries Life. But the stock apears to be less risky and, when comparing its historical volatility, Neo Neon Holdings Limited is 1.38 times less risky than Mercuries Life. The stock trades about -0.07 of its potential returns per unit of risk. The Mercuries Life Insurance is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  481.00  in Mercuries Life Insurance on January 31, 2024 and sell it today you would earn a total of  92.00  from holding Mercuries Life Insurance or generate 19.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.0%
ValuesDaily Returns

Neo Neon Holdings Limited  vs.  Mercuries Life Insurance

 Performance 
       Timeline  
Neo Neon Holdings 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Neo Neon Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Neo Neon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Mercuries Life Insurance 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Mercuries Life Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Mercuries Life showed solid returns over the last few months and may actually be approaching a breakup point.

Neo Neon and Mercuries Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Neo Neon and Mercuries Life

The main advantage of trading using opposite Neo Neon and Mercuries Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neo Neon position performs unexpectedly, Mercuries Life 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 Mercuries Life will offset losses from the drop in Mercuries Life's long position.
The idea behind Neo Neon Holdings Limited and Mercuries Life Insurance 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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