Correlation Between FC Investment and Mercantile Investment

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

By analyzing existing cross correlation between FC Investment Trust and The Mercantile Investment, you can compare the effects of market volatilities on FC Investment 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 FC Investment with a short position of Mercantile Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of FC Investment and Mercantile Investment.

Diversification Opportunities for FC Investment and Mercantile Investment

0.82

Correlation Coefficient

FC Investment  Mercantile Investment

Very poor diversification

The 3 months correlation between FCIT and Mercantile is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust 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 FC Investment 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 FC Investment Trust 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 FC Investment i.e., FC Investment and Mercantile Investment go up and down completely randomly.

Pair Corralation between FC Investment and Mercantile Investment

Assuming the 90 days trading horizon FC Investment is expected to generate 1.07 times less return on investment than Mercantile Investment. But when comparing it to its historical volatility, FC Investment Trust is 1.28 times less risky than Mercantile Investment. It trades about 0.07 of its potential returns per unit of risk. The Mercantile Investment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18,410  in The Mercantile Investment on April 24, 2025 and sell it today you would earn a total of  6,790  from holding The Mercantile Investment or generate 36.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

FC Investment Trust  vs.  The Mercantile Investment

FC Investment Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FC Investment Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, FC Investment may actually be approaching a critical reversion point that can send shares even higher in August 2025.

The Mercantile Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Mercantile Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Mercantile Investment may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with FC Investment and Mercantile Investment

The main advantage of trading using opposite FC Investment and Mercantile Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FC Investment 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.

The idea behind FC Investment Trust and The Mercantile Investment 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..