Correlation Between Mirle Automation and Merry Electronics

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

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

Diversification Opportunities for Mirle Automation and Merry Electronics

0.26

Correlation Coefficient

Mirle Automation  Merry Electronics

Modest diversification

The 3 months correlation between Mirle and Merry is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Mirle Automation Corp and Merry Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merry Electronics and Mirle Automation 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 Mirle Automation Corp 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 Mirle Automation i.e., Mirle Automation and Merry Electronics go up and down completely randomly.

Pair Corralation between Mirle Automation and Merry Electronics

Assuming the 90 days trading horizon Mirle Automation Corp is expected to generate 1.89 times more return on investment than Merry Electronics. However, Mirle Automation is 1.89 times more volatile than Merry Electronics Co. It trades about 0.2 of its potential returns per unit of risk. Merry Electronics Co is currently generating about 0.04 per unit of risk. If you would invest  7,310  in Mirle Automation Corp on October 11, 2024 and sell it today you would earn a total of  750.00  from holding Mirle Automation Corp or generate 10.26% return on investment over 90 days.

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

Mirle Automation Corp  vs.  Merry Electronics Co

Mirle Automation Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mirle Automation Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Mirle Automation is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the 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 fairly stable basic indicators, Merry Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Mirle Automation and Merry Electronics

The main advantage of trading using opposite Mirle Automation and Merry Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mirle Automation 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 Mirle Automation Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.