Correlation Between Merry Electronics and Taiwan Sanyo
Can any of the company-specific risk be diversified away by investing in both Merry Electronics and Taiwan Sanyo 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 Taiwan Sanyo 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 Taiwan Sanyo Electric, you can compare the effects of market volatilities on Merry Electronics and Taiwan Sanyo 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 Taiwan Sanyo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merry Electronics and Taiwan Sanyo.
Diversification Opportunities for Merry Electronics and Taiwan Sanyo
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merry and Taiwan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Merry Electronics Co and Taiwan Sanyo Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Sanyo Electric 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 Taiwan Sanyo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Sanyo Electric has no effect on the direction of Merry Electronics i.e., Merry Electronics and Taiwan Sanyo go up and down completely randomly.
Pair Corralation between Merry Electronics and Taiwan Sanyo
Assuming the 90 days trading horizon Merry Electronics Co is expected to generate 1.75 times more return on investment than Taiwan Sanyo. However, Merry Electronics is 1.75 times more volatile than Taiwan Sanyo Electric. It trades about 0.03 of its potential returns per unit of risk. Taiwan Sanyo Electric is currently generating about 0.02 per unit of risk. If you would invest 8,890 in Merry Electronics Co on August 26, 2024 and sell it today you would earn a total of 2,010 from holding Merry Electronics Co or generate 22.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merry Electronics Co vs. Taiwan Sanyo Electric
Performance |
| Timeline |
| Merry Electronics |
| Taiwan Sanyo Electric |
Merry Electronics and Taiwan Sanyo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merry Electronics and Taiwan Sanyo
The main advantage of trading using opposite Merry Electronics and Taiwan Sanyo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merry Electronics position performs unexpectedly, Taiwan Sanyo 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 Taiwan Sanyo will offset losses from the drop in Taiwan Sanyo's long position.| Merry Electronics vs. Hunya Foods Co | Merry Electronics vs. Cathay Financial Holding | Merry Electronics vs. Asustek Computer | Merry Electronics vs. Taiwan Cooperative Financial |
| Taiwan Sanyo vs. Taiwan Semiconductor Manufacturing | Taiwan Sanyo vs. Hon Hai Precision | Taiwan Sanyo vs. MediaTek | Taiwan Sanyo 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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