Correlation Between Merida Industry and Topkey Corp

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

Diversification Opportunities for Merida Industry and Topkey Corp

0.63

Correlation Coefficient

Merida Industry  Topkey Corp

Poor diversification

The 3 months correlation between Merida and Topkey is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Topkey Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topkey 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 Topkey Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topkey Corp has no effect on the direction of Merida Industry i.e., Merida Industry and Topkey Corp go up and down completely randomly.

Pair Corralation between Merida Industry and Topkey Corp

Assuming the 90 days trading horizon Merida Industry Co is expected to under-perform the Topkey Corp. In addition to that, Merida Industry is 1.12 times more volatile than Topkey Corp. It trades about -0.26 of its total potential returns per unit of risk. Topkey Corp is currently generating about -0.1 per unit of volatility. If you would invest  22,600  in Topkey Corp on September 20, 2024 and sell it today you would lose (2,700) from holding Topkey Corp or give up 11.95% of portfolio value over 90 days.

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

Merida Industry Co  vs.  Topkey 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.

Topkey Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topkey Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Merida Industry and Topkey Corp

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

The idea behind Merida Industry Co and Topkey 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.