Correlation Between Meritage Hospitality and Community Bancorp

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

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

Diversification Opportunities for Meritage Hospitality and Community Bancorp

0.06

Correlation Coefficient

Meritage Hospitality  Community Bancorp

Significant diversification

The 3 months correlation between Meritage and Community is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Meritage Hospitality Group and Community Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bancorp and Meritage Hospitality 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 Hospitality Group are associated (or correlated) with Community Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bancorp has no effect on the direction of Meritage Hospitality i.e., Meritage Hospitality and Community Bancorp go up and down completely randomly.

Pair Corralation between Meritage Hospitality and Community Bancorp

If you would invest  1,670  in Community Bancorp on October 27, 2024 and sell it today you would earn a total of  30.00  from holding Community Bancorp or generate 1.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.88%
Values	Daily Returns

Meritage Hospitality Group  vs.  Community Bancorp

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.

Community Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Community Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Community Bancorp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Meritage Hospitality and Community Bancorp

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

The idea behind Meritage Hospitality Group and Community Bancorp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.