Correlation Between Merida Industry and Carnival Industrial

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

Diversification Opportunities for Merida Industry and Carnival Industrial

0.86

Correlation Coefficient

Merida Industry  Carnival Industrial

Very poor diversification

The 3 months correlation between Merida and Carnival is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Carnival Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival Industrial Corp 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 Carnival Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival Industrial Corp has no effect on the direction of Merida Industry i.e., Merida Industry and Carnival Industrial go up and down completely randomly.

Pair Corralation between Merida Industry and Carnival Industrial

Assuming the 90 days trading horizon Merida Industry Co is expected to generate 1.88 times more return on investment than Carnival Industrial. However, Merida Industry is 1.88 times more volatile than Carnival Industrial Corp. It trades about 0.0 of its potential returns per unit of risk. Carnival Industrial Corp is currently generating about -0.05 per unit of risk. If you would invest  16,830  in Merida Industry Co on September 30, 2024 and sell it today you would lose (1,580) from holding Merida Industry Co or give up 9.39% of portfolio value over 90 days.

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

Merida Industry Co  vs.  Carnival Industrial Corp

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.

Carnival Industrial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnival Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carnival Industrial 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 Merida Industry and Carnival Industrial

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

The idea behind Merida Industry Co and Carnival Industrial Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.