Correlation Between Merida Industry and Tung Ho

Can any of the company-specific risk be diversified away by investing in both Merida Industry and Tung Ho 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 Tung Ho 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 Tung Ho Textile, you can compare the effects of market volatilities on Merida Industry and Tung Ho 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 Tung Ho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merida Industry and Tung Ho.

Diversification Opportunities for Merida Industry and Tung Ho

-0.4

Correlation Coefficient

Merida Industry  Tung Ho

Very good diversification

The 3 months correlation between Merida and Tung is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Tung Ho Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Textile 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 Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Textile has no effect on the direction of Merida Industry i.e., Merida Industry and Tung Ho go up and down completely randomly.

Pair Corralation between Merida Industry and Tung Ho

Assuming the 90 days trading horizon Merida Industry Co is expected to under-perform the Tung Ho. In addition to that, Merida Industry is 1.19 times more volatile than Tung Ho Textile. It trades about -0.09 of its total potential returns per unit of risk. Tung Ho Textile is currently generating about 0.03 per unit of volatility. If you would invest  2,380  in Tung Ho Textile on September 30, 2024 and sell it today you would earn a total of  95.00  from holding Tung Ho Textile or generate 3.99% return on investment over 90 days.

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

Merida Industry Co  vs.  Tung Ho Textile

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.

Tung Ho Textile

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tung Ho Textile are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tung Ho may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Merida Industry and Tung Ho

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

The idea behind Merida Industry Co and Tung Ho Textile 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.