Correlation Between Meritage Homes and DETALION GAMES

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

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

Diversification Opportunities for Meritage Homes and DETALION GAMES

-0.15

Correlation Coefficient

Meritage Homes  DETALION GAMES

Good diversification

The 3 months correlation between Meritage and DETALION is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Meritage Homes and DETALION GAMES SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DETALION GAMES SA and Meritage Homes 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 Meritage Homes are associated (or correlated) with DETALION GAMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DETALION GAMES SA has no effect on the direction of Meritage Homes i.e., Meritage Homes and DETALION GAMES go up and down completely randomly.

Pair Corralation between Meritage Homes and DETALION GAMES

Assuming the 90 days trading horizon Meritage Homes is expected to generate 1.65 times more return on investment than DETALION GAMES. However, Meritage Homes is 1.65 times more volatile than DETALION GAMES SA. It trades about 0.05 of its potential returns per unit of risk. DETALION GAMES SA is currently generating about 0.06 per unit of risk. If you would invest  7,354  in Meritage Homes on December 23, 2024 and sell it today you would lose (804.00) from holding Meritage Homes or give up 10.93% of portfolio value over 90 days.

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

Meritage Homes  vs.  DETALION GAMES SA

Meritage Homes

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Meritage Homes are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Meritage Homes unveiled solid returns over the last few months and may actually be approaching a breakup point.

DETALION GAMES SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DETALION GAMES SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DETALION GAMES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meritage Homes and DETALION GAMES

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

The idea behind Meritage Homes and DETALION GAMES SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.