Correlation Between Merry Electronics and Sampo Corp
Can any of the company-specific risk be diversified away by investing in both Merry Electronics and Sampo Corp 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 Merry Electronics and Sampo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merry Electronics Co and Sampo Corp, you can compare the effects of market volatilities on Merry Electronics and Sampo Corp 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 Merry Electronics with a short position of Sampo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merry Electronics and Sampo Corp.
Diversification Opportunities for Merry Electronics and Sampo Corp
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Merry and Sampo is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Merry Electronics Co and Sampo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sampo Corp and Merry Electronics 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 Merry Electronics Co are associated (or correlated) with Sampo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sampo Corp has no effect on the direction of Merry Electronics i.e., Merry Electronics and Sampo Corp go up and down completely randomly.
Pair Corralation between Merry Electronics and Sampo Corp
Assuming the 90 days trading horizon Merry Electronics Co is expected to generate 5.54 times more return on investment than Sampo Corp. However, Merry Electronics is 5.54 times more volatile than Sampo Corp. It trades about 0.05 of its potential returns per unit of risk. Sampo Corp is currently generating about 0.09 per unit of risk. If you would invest 10,500 in Merry Electronics Co on November 4, 2024 and sell it today you would earn a total of 100.00 from holding Merry Electronics Co or generate 0.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merry Electronics Co vs. Sampo Corp
Performance |
| Timeline |
| Merry Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Sampo Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Merry Electronics and Sampo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merry Electronics and Sampo Corp
The main advantage of trading using opposite Merry Electronics and Sampo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merry Electronics position performs unexpectedly, Sampo Corp 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 Sampo Corp will offset losses from the drop in Sampo Corp's long position.The idea behind Merry Electronics Co and Sampo Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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