Correlation Between Merida Industry and De Licacy

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

Diversification Opportunities for Merida Industry and De Licacy

-0.8

Correlation Coefficient

Merida Industry  De Licacy

Pay attention - limited upside

The 3 months correlation between Merida and 1464 is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and De Licacy Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Licacy Industrial 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 De Licacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Licacy Industrial has no effect on the direction of Merida Industry i.e., Merida Industry and De Licacy go up and down completely randomly.

Pair Corralation between Merida Industry and De Licacy

Assuming the 90 days trading horizon Merida Industry Co is expected to under-perform the De Licacy. But the stock apears to be less risky and, when comparing its historical volatility, Merida Industry Co is 1.35 times less risky than De Licacy. The stock trades about -0.02 of its potential returns per unit of risk. The De Licacy Industrial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,545  in De Licacy Industrial on September 22, 2024 and sell it today you would earn a total of  130.00  from holding De Licacy Industrial or generate 8.41% return on investment over 90 days.

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

Merida Industry Co  vs.  De Licacy Industrial

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.

De Licacy Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Licacy Industrial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, De Licacy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merida Industry and De Licacy

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

The idea behind Merida Industry Co and De Licacy Industrial 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.