Correlation Between Community Bancorp and Meritage Hospitality

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

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

Diversification Opportunities for Community Bancorp and Meritage Hospitality

-0.19

Correlation Coefficient

Community Bancorp  Meritage Hospitality

Good diversification

The 3 months correlation between Community and Meritage is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Community Bancorp and Meritage Hospitality Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meritage Hospitality and Community Bancorp 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 Community Bancorp 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 Community Bancorp i.e., Community Bancorp and Meritage Hospitality go up and down completely randomly.

Pair Corralation between Community Bancorp and Meritage Hospitality

If you would invest  1,675  in Community Bancorp on October 12, 2024 and sell it today you would earn a total of  15.00  from holding Community Bancorp or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Community Bancorp  vs.  Meritage Hospitality Group

Community Bancorp

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Community Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Community Bancorp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Meritage Hospitality

Risk-Adjusted Performance

0 of 100

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 Community Bancorp and Meritage Hospitality

The main advantage of trading using opposite Community Bancorp and Meritage Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Bancorp 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 Community Bancorp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.