Correlation Between Merida Industry and Giant Manufacturing

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

Diversification Opportunities for Merida Industry and Giant Manufacturing

0.91

Correlation Coefficient

Merida Industry  Giant Manufacturing

Almost no diversification

The 3 months correlation between Merida and Giant is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Giant Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giant Manufacturing 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 Giant Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giant Manufacturing has no effect on the direction of Merida Industry i.e., Merida Industry and Giant Manufacturing go up and down completely randomly.

Pair Corralation between Merida Industry and Giant Manufacturing

Assuming the 90 days trading horizon Merida Industry is expected to generate 1.13 times less return on investment than Giant Manufacturing. In addition to that, Merida Industry is 1.12 times more volatile than Giant Manufacturing Co. It trades about 0.03 of its total potential returns per unit of risk. Giant Manufacturing Co is currently generating about 0.04 per unit of volatility. If you would invest  14,500  in Giant Manufacturing Co on December 27, 2024 and sell it today you would earn a total of  450.00  from holding Giant Manufacturing Co or generate 3.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.21%
Values	Daily Returns

Merida Industry Co  vs.  Giant Manufacturing Co

Merida Industry

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Merida Industry Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Merida Industry is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Giant Manufacturing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Giant Manufacturing Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Giant Manufacturing 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 Giant Manufacturing

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

The idea behind Merida Industry Co and Giant Manufacturing Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.