Correlation Between Merida Industry and Sun Race

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

Diversification Opportunities for Merida Industry and Sun Race

0.77

Correlation Coefficient

Merida Industry  Sun Race

Poor diversification

The 3 months correlation between Merida and Sun is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Sun Race Sturmey Archer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Race Sturmey 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 Sun Race. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Race Sturmey has no effect on the direction of Merida Industry i.e., Merida Industry and Sun Race go up and down completely randomly.

Pair Corralation between Merida Industry and Sun Race

Assuming the 90 days trading horizon Merida Industry Co is expected to generate 1.65 times more return on investment than Sun Race. However, Merida Industry is 1.65 times more volatile than Sun Race Sturmey Archer. It trades about 0.09 of its potential returns per unit of risk. Sun Race Sturmey Archer is currently generating about 0.13 per unit of risk. If you would invest  15,550  in Merida Industry Co on December 21, 2024 and sell it today you would earn a total of  1,650  from holding Merida Industry Co or generate 10.61% return on investment over 90 days.

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

Merida Industry Co  vs.  Sun Race Sturmey Archer

Merida Industry

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Merida Industry Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Merida Industry showed solid returns over the last few months and may actually be approaching a breakup point.

Sun Race Sturmey

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Race Sturmey Archer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sun Race may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Merida Industry and Sun Race

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

The idea behind Merida Industry Co and Sun Race Sturmey Archer 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.