Correlation Between Reward Wool and Merida Industry
Can any of the company-specific risk be diversified away by investing in both Reward Wool and Merida Industry 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 Reward Wool and Merida Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reward Wool Industry and Merida Industry Co, you can compare the effects of market volatilities on Reward Wool and Merida Industry 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 Reward Wool with a short position of Merida Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reward Wool and Merida Industry.
Diversification Opportunities for Reward Wool and Merida Industry
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Reward and Merida is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Reward Wool Industry and Merida Industry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merida Industry and Reward Wool 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 Reward Wool Industry are associated (or correlated) with Merida Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merida Industry has no effect on the direction of Reward Wool i.e., Reward Wool and Merida Industry go up and down completely randomly.
Pair Corralation between Reward Wool and Merida Industry
Assuming the 90 days trading horizon Reward Wool Industry is expected to generate 0.53 times more return on investment than Merida Industry. However, Reward Wool Industry is 1.88 times less risky than Merida Industry. It trades about -0.39 of its potential returns per unit of risk. Merida Industry Co is currently generating about -0.54 per unit of risk. If you would invest 4,480 in Reward Wool Industry on August 25, 2024 and sell it today you would lose (715.00) from holding Reward Wool Industry or give up 15.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reward Wool Industry vs. Merida Industry Co
Performance |
| Timeline |
| Reward Wool Industry |
| Merida Industry |
Reward Wool and Merida Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reward Wool and Merida Industry
The main advantage of trading using opposite Reward Wool and Merida Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reward Wool position performs unexpectedly, Merida Industry 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 Merida Industry will offset losses from the drop in Merida Industry's long position.| Reward Wool vs. Taiwan Semiconductor Manufacturing | Reward Wool vs. Hon Hai Precision | Reward Wool vs. MediaTek | Reward Wool vs. Chunghwa Telecom Co |
| Merida Industry vs. Taiwan Semiconductor Manufacturing | Merida Industry vs. Hon Hai Precision | Merida Industry vs. MediaTek | Merida Industry vs. Chunghwa Telecom Co |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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