Correlation Between Aerospace Industrial and Merida Industry

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

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

Diversification Opportunities for Aerospace Industrial and Merida Industry

0.93

Correlation Coefficient

Aerospace Industrial  Merida Industry

Almost no diversification

The 3 months correlation between Aerospace and Merida is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Aerospace Industrial Developme and Merida Industry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merida Industry and Aerospace Industrial 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 Aerospace Industrial Development are associated (or correlated) with Merida Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merida Industry has no effect on the direction of Aerospace Industrial i.e., Aerospace Industrial and Merida Industry go up and down completely randomly.

Pair Corralation between Aerospace Industrial and Merida Industry

Assuming the 90 days trading horizon Aerospace Industrial Development is expected to generate 0.61 times more return on investment than Merida Industry. However, Aerospace Industrial Development is 1.64 times less risky than Merida Industry. It trades about -0.06 of its potential returns per unit of risk. Merida Industry Co is currently generating about -0.11 per unit of risk. If you would invest  4,485  in Aerospace Industrial Development on September 26, 2024 and sell it today you would lose (85.00) from holding Aerospace Industrial Development or give up 1.9% of portfolio value over 90 days.

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

Aerospace Industrial Developme  vs.  Merida Industry Co

Aerospace Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerospace Industrial Development 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.

Merida Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merida Industry Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Aerospace Industrial and Merida Industry

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

The idea behind Aerospace Industrial Development and Merida Industry 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.