Correlation Between Merry Electronics and WinMate Communication

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

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

Diversification Opportunities for Merry Electronics and WinMate Communication

-0.42

Correlation Coefficient

Merry Electronics  WinMate Communication

Very good diversification

The 3 months correlation between Merry and WinMate is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Merry Electronics Co and WinMate Communication INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WinMate Communication INC and Merry 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 Merry Electronics Co are associated (or correlated) with WinMate Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WinMate Communication INC has no effect on the direction of Merry Electronics i.e., Merry Electronics and WinMate Communication go up and down completely randomly.

Pair Corralation between Merry Electronics and WinMate Communication

Assuming the 90 days trading horizon Merry Electronics Co is expected to under-perform the WinMate Communication. But the stock apears to be less risky and, when comparing its historical volatility, Merry Electronics Co is 2.1 times less risky than WinMate Communication. The stock trades about -0.11 of its potential returns per unit of risk. The WinMate Communication INC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  15,900  in WinMate Communication INC on October 8, 2024 and sell it today you would earn a total of  1,200  from holding WinMate Communication INC or generate 7.55% return on investment over 90 days.

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

Merry Electronics Co  vs.  WinMate Communication INC

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.

WinMate Communication INC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WinMate Communication INC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, WinMate Communication showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merry Electronics and WinMate Communication

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

The idea behind Merry Electronics Co and WinMate Communication INC 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..