Can any of the company-specific risk be diversified away by investing in both A2Z Smart and Mercury Systems 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 A2Z Smart and Mercury Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between A2Z Smart Technologies and Mercury Systems, you can compare the effects of market volatilities on A2Z Smart and Mercury Systems 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 A2Z Smart with a short position of Mercury Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of A2Z Smart and Mercury Systems.
Diversification Opportunities for A2Z Smart and Mercury Systems
The 3 months correlation between A2Z and Mercury is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding A2Z Smart Technologies and Mercury Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Systems and A2Z Smart 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 A2Z Smart Technologies are associated (or correlated) with Mercury Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Systems has no effect on the direction of A2Z Smart i.e., A2Z Smart and Mercury Systems go up and down completely randomly.
Pair Corralation between A2Z Smart and Mercury Systems
Allowing for the 90-day total investment horizon A2Z Smart is expected to generate 20.87 times less return on investment than Mercury Systems. In addition to that, A2Z Smart is 3.41 times more volatile than Mercury Systems. It trades about 0.0 of its total potential returns per unit of risk. Mercury Systems is currently generating about 0.17 per unit of volatility. If you would invest 2,918 in Mercury Systems on March 6, 2024 and sell it today you would earn a total of 218.00 from holding Mercury Systems or generate 7.47% return on investment over 90 days.
Over the last 90 days A2Z Smart Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Mercury Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Mercury Systems is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.