Correlation Between Merida Industry and Federal Corp

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

Diversification Opportunities for Merida Industry and Federal Corp

0.37

Correlation Coefficient

Merida Industry  Federal Corp

Weak diversification

The 3 months correlation between Merida and Federal is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Federal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal 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 Federal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Corp has no effect on the direction of Merida Industry i.e., Merida Industry and Federal Corp go up and down completely randomly.

Pair Corralation between Merida Industry and Federal Corp

Assuming the 90 days trading horizon Merida Industry Co is expected to generate 1.91 times more return on investment than Federal Corp. However, Merida Industry is 1.91 times more volatile than Federal Corp. It trades about -0.02 of its potential returns per unit of risk. Federal Corp is currently generating about -0.69 per unit of risk. If you would invest  15,700  in Merida Industry Co on September 22, 2024 and sell it today you would lose (200.00) from holding Merida Industry Co or give up 1.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Merida Industry Co  vs.  Federal 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.

Federal Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Corp 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.

Pair Trading with Merida Industry and Federal Corp

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

The idea behind Merida Industry Co and Federal 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.