Correlation Between Avision and Merida Industry
Can any of the company-specific risk be diversified away by investing in both Avision 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 Avision and Merida Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avision and Merida Industry Co, you can compare the effects of market volatilities on Avision 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 Avision with a short position of Merida Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avision and Merida Industry.
Diversification Opportunities for Avision and Merida Industry
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avision and Merida is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Avision and Merida Industry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merida Industry and Avision 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 Avision 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 Avision i.e., Avision and Merida Industry go up and down completely randomly.
Pair Corralation between Avision and Merida Industry
Assuming the 90 days trading horizon Avision is expected to under-perform the Merida Industry. In addition to that, Avision is 1.72 times more volatile than Merida Industry Co. It trades about -0.23 of its total potential returns per unit of risk. Merida Industry Co is currently generating about -0.18 per unit of volatility. If you would invest 17,600 in Merida Industry Co on September 2, 2024 and sell it today you would lose (1,600) from holding Merida Industry Co or give up 9.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avision vs. Merida Industry Co
Performance |
| Timeline |
| Avision |
| Merida Industry |
Avision and Merida Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avision and Merida Industry
The main advantage of trading using opposite Avision and Merida Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avision 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.The idea behind Avision and Merida Industry Co 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.| Merida Industry vs. Giant Manufacturing Co | Merida Industry vs. Cheng Shin Rubber | Merida Industry vs. Feng Tay Enterprises | Merida Industry vs. President Chain Store |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Stocks Directory Find actively traded stocks across global markets | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |