Correlation Between Marine Petroleum and Merchants National

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

By analyzing existing cross correlation between Marine Petroleum Trust and Merchants National Properties, you can compare the effects of market volatilities on Marine Petroleum and Merchants National 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 Marine Petroleum with a short position of Merchants National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marine Petroleum and Merchants National.

Diversification Opportunities for Marine Petroleum and Merchants National

-0.6

Correlation Coefficient

Marine Petroleum  Merchants National

Excellent diversification

The 3 months correlation between Marine and Merchants is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Marine Petroleum Trust and Merchants National Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants National and Marine Petroleum 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 Marine Petroleum Trust are associated (or correlated) with Merchants National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants National has no effect on the direction of Marine Petroleum i.e., Marine Petroleum and Merchants National go up and down completely randomly.

Pair Corralation between Marine Petroleum and Merchants National

Assuming the 90 days horizon Marine Petroleum Trust is expected to generate 3.96 times more return on investment than Merchants National. However, Marine Petroleum is 3.96 times more volatile than Merchants National Properties. It trades about 0.07 of its potential returns per unit of risk. Merchants National Properties is currently generating about -0.06 per unit of risk. If you would invest  380.00  in Marine Petroleum Trust on May 5, 2025 and sell it today you would earn a total of  68.00  from holding Marine Petroleum Trust or generate 17.89% return on investment over 90 days.

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

Marine Petroleum Trust  vs.  Merchants National Properties

Marine Petroleum Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marine Petroleum Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Marine Petroleum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Merchants National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merchants National Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Merchants National is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Marine Petroleum and Merchants National

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

The idea behind Marine Petroleum Trust and Merchants National Properties 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.