Correlation Between Merida Industry and Universal

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

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

Diversification Opportunities for Merida Industry and Universal

-0.13

Correlation Coefficient

Merida Industry  Universal

Good diversification

The 3 months correlation between Merida and Universal is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal and Merida Industry 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 Merida Industry Co are associated (or correlated) with Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Merida Industry i.e., Merida Industry and Universal go up and down completely randomly.

Pair Corralation between Merida Industry and Universal

Assuming the 90 days trading horizon Merida Industry Co is expected to generate 0.69 times more return on investment than Universal. However, Merida Industry Co is 1.45 times less risky than Universal. It trades about 0.03 of its potential returns per unit of risk. Universal is currently generating about -0.04 per unit of risk. If you would invest  15,250  in Merida Industry Co on December 30, 2024 and sell it today you would earn a total of  300.00  from holding Merida Industry Co or generate 1.97% return on investment over 90 days.

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

Merida Industry Co  vs.  Universal

Merida Industry

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merida Industry Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Merida Industry is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Universal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal 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 Merida Industry and Universal

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

The idea behind Merida Industry Co and Universal 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.