Correlation Between Merida Industry and Altek Corp

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

Diversification Opportunities for Merida Industry and Altek Corp

0.79

Correlation Coefficient

Merida Industry  Altek Corp

Poor diversification

The 3 months correlation between Merida and Altek is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Altek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altek 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 Altek Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altek Corp has no effect on the direction of Merida Industry i.e., Merida Industry and Altek Corp go up and down completely randomly.

Pair Corralation between Merida Industry and Altek Corp

Assuming the 90 days trading horizon Merida Industry Co is expected to under-perform the Altek Corp. But the stock apears to be less risky and, when comparing its historical volatility, Merida Industry Co is 1.28 times less risky than Altek Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Altek Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,235  in Altek Corp on September 22, 2024 and sell it today you would earn a total of  50.00  from holding Altek Corp or generate 1.55% return on investment over 90 days.

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

Merida Industry Co  vs.  Altek 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.

Altek Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Merida Industry Co and Altek 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .