Can any of the company-specific risk be diversified away by investing in both Nomura Holdings and Banco Mercantil 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 Nomura Holdings and Banco Mercantil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nomura Holdings and Banco Mercantil do, you can compare the effects of market volatilities on Nomura Holdings and Banco Mercantil 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 Nomura Holdings with a short position of Banco Mercantil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nomura Holdings and Banco Mercantil.
Diversification Opportunities for Nomura Holdings and Banco Mercantil
The 3 months correlation between Nomura and Banco is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nomura Holdings and Banco Mercantil do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Mercantil do and Nomura Holdings 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 Nomura Holdings are associated (or correlated) with Banco Mercantil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Mercantil do has no effect on the direction of Nomura Holdings i.e., Nomura Holdings and Banco Mercantil go up and down completely randomly.
Pair Corralation between Nomura Holdings and Banco Mercantil
Assuming the 90 days trading horizon Nomura Holdings is expected to generate 1.84 times less return on investment than Banco Mercantil. But when comparing it to its historical volatility, Nomura Holdings is 2.35 times less risky than Banco Mercantil. It trades about 0.12 of its potential returns per unit of risk. Banco Mercantil do is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,350 in Banco Mercantil do on March 6, 2024 and sell it today you would earn a total of 280.00 from holding Banco Mercantil do or generate 11.91% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Nomura Holdings may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Over the last 90 days Banco Mercantil do has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Banco Mercantil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.