Correlation Between Butler National and Meritage Hospitality

Can any of the company-specific risk be diversified away by investing in both Butler National and Meritage Hospitality 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 Butler National and Meritage Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Butler National Corp and Meritage Hospitality Group, you can compare the effects of market volatilities on Butler National and Meritage Hospitality 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 Butler National with a short position of Meritage Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Butler National and Meritage Hospitality.

Diversification Opportunities for Butler National and Meritage Hospitality

0.0

Correlation Coefficient

Butler National  Meritage Hospitality

Pay attention - limited upside

The 3 months correlation between Butler and Meritage is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Butler National Corp and Meritage Hospitality Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meritage Hospitality and Butler National 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 Butler National Corp are associated (or correlated) with Meritage Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meritage Hospitality has no effect on the direction of Butler National i.e., Butler National and Meritage Hospitality go up and down completely randomly.

Pair Corralation between Butler National and Meritage Hospitality

If you would invest (100.00) in Meritage Hospitality Group on December 2, 2024 and sell it today you would earn a total of  100.00  from holding Meritage Hospitality Group or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Butler National Corp  vs.  Meritage Hospitality Group

Butler National Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Butler National Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Meritage Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meritage Hospitality Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Meritage Hospitality is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Butler National and Meritage Hospitality

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

The idea behind Butler National Corp and Meritage Hospitality Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.