Correlation Between Mobiletron Electronics and Merry Electronics

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

By analyzing existing cross correlation between Mobiletron Electronics Co and Merry Electronics Co, you can compare the effects of market volatilities on Mobiletron Electronics and Merry Electronics 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 Mobiletron Electronics with a short position of Merry Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mobiletron Electronics and Merry Electronics.

Diversification Opportunities for Mobiletron Electronics and Merry Electronics

0.31

Correlation Coefficient

Mobiletron Electronics  Merry Electronics

Weak diversification

The 3 months correlation between Mobiletron and Merry is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Mobiletron Electronics Co and Merry Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merry Electronics and Mobiletron Electronics 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 Mobiletron Electronics Co are associated (or correlated) with Merry Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merry Electronics has no effect on the direction of Mobiletron Electronics i.e., Mobiletron Electronics and Merry Electronics go up and down completely randomly.

Pair Corralation between Mobiletron Electronics and Merry Electronics

Assuming the 90 days trading horizon Mobiletron Electronics Co is expected to under-perform the Merry Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Mobiletron Electronics Co is 1.0 times less risky than Merry Electronics. The stock trades about -0.09 of its potential returns per unit of risk. The Merry Electronics Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  11,450  in Merry Electronics Co on October 8, 2024 and sell it today you would lose (950.00) from holding Merry Electronics Co or give up 8.3% of portfolio value over 90 days.

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

Mobiletron Electronics Co  vs.  Merry Electronics Co

Mobiletron Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mobiletron Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Merry Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merry Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Mobiletron Electronics and Merry Electronics

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

The idea behind Mobiletron Electronics Co and Merry Electronics Co 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..