Correlation Between Meritage Hospitality and New Ulm

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

Diversification Opportunities for Meritage Hospitality and New Ulm

0.65

Correlation Coefficient

Meritage Hospitality  New Ulm

Poor diversification

The 3 months correlation between Meritage and New is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Meritage Hospitality Group and New Ulm Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Ulm Telecom 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 New Ulm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Ulm Telecom has no effect on the direction of Meritage Hospitality i.e., Meritage Hospitality and New Ulm go up and down completely randomly.

Pair Corralation between Meritage Hospitality and New Ulm

If you would invest  800.00  in New Ulm Telecom on September 4, 2024 and sell it today you would earn a total of  60.00  from holding New Ulm Telecom or generate 7.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Meritage Hospitality Group  vs.  New Ulm Telecom

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.

New Ulm Telecom

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Ulm Telecom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, New Ulm reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meritage Hospitality and New Ulm

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

The idea behind Meritage Hospitality Group and New Ulm Telecom 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.