Correlation Between Meritage Hospitality and F M

Can any of the company-specific risk be diversified away by investing in both Meritage Hospitality and F M 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 F M 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 F M Bank, you can compare the effects of market volatilities on Meritage Hospitality and F M 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 F M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meritage Hospitality and F M.

Diversification Opportunities for Meritage Hospitality and F M

-0.78

Correlation Coefficient

Meritage Hospitality  F M

Pay attention - limited upside

The 3 months correlation between Meritage and FMBM is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Meritage Hospitality Group and F M Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on F M Bank 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 F M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of F M Bank has no effect on the direction of Meritage Hospitality i.e., Meritage Hospitality and F M go up and down completely randomly.

Pair Corralation between Meritage Hospitality and F M

If you would invest  1,975  in Meritage Hospitality Group on October 27, 2024 and sell it today you would earn a total of  0.00  from holding Meritage Hospitality Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	5.26%
Values	Daily Returns

Meritage Hospitality Group  vs.  F M Bank

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.

F M Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days F M Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Meritage Hospitality and F M

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

The idea behind Meritage Hospitality Group and F M Bank 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.