Correlation Between New Advanced and Merida Industry
Can any of the company-specific risk be diversified away by investing in both New Advanced 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 New Advanced and Merida Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Advanced Electronics and Merida Industry Co, you can compare the effects of market volatilities on New Advanced 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 New Advanced with a short position of Merida Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Advanced and Merida Industry.
Diversification Opportunities for New Advanced and Merida Industry
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and Merida is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding New Advanced Electronics and Merida Industry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merida Industry and New Advanced 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 New Advanced Electronics 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 New Advanced i.e., New Advanced and Merida Industry go up and down completely randomly.
Pair Corralation between New Advanced and Merida Industry
Assuming the 90 days trading horizon New Advanced Electronics is expected to generate 0.92 times more return on investment than Merida Industry. However, New Advanced Electronics is 1.08 times less risky than Merida Industry. It trades about -0.21 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 6,330 in New Advanced Electronics on August 25, 2024 and sell it today you would lose (980.00) from holding New Advanced Electronics or give up 15.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Advanced Electronics vs. Merida Industry Co
Performance |
| Timeline |
| New Advanced Electronics |
| Merida Industry |
New Advanced and Merida Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Advanced and Merida Industry
The main advantage of trading using opposite New Advanced and Merida Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Advanced 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.| New Advanced vs. Advantech Co | New Advanced vs. IEI Integration Corp | New Advanced vs. Flytech Technology Co | New Advanced vs. ADLINK Technology |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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