Correlation Between Arima Communications and Merry Electronics
Can any of the company-specific risk be diversified away by investing in both Arima Communications and Merry Electronics 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 Arima Communications and Merry Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arima Communications Corp and Merry Electronics Co, you can compare the effects of market volatilities on Arima Communications and Merry Electronics 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 Arima Communications with a short position of Merry Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arima Communications and Merry Electronics.
Diversification Opportunities for Arima Communications and Merry Electronics
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Arima and Merry is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Arima Communications Corp and Merry Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merry Electronics and Arima Communications 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 Arima Communications Corp are associated (or correlated) with Merry Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merry Electronics has no effect on the direction of Arima Communications i.e., Arima Communications and Merry Electronics go up and down completely randomly.
Pair Corralation between Arima Communications and Merry Electronics
Assuming the 90 days trading horizon Arima Communications Corp is expected to generate 2.3 times more return on investment than Merry Electronics. However, Arima Communications is 2.3 times more volatile than Merry Electronics Co. It trades about 0.6 of its potential returns per unit of risk. Merry Electronics Co is currently generating about -0.06 per unit of risk. If you would invest 950.00 in Arima Communications Corp on August 29, 2024 and sell it today you would earn a total of 715.00 from holding Arima Communications Corp or generate 75.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arima Communications Corp vs. Merry Electronics Co
Performance |
| Timeline |
| Arima Communications Corp |
| Merry Electronics |
Arima Communications and Merry Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arima Communications and Merry Electronics
The main advantage of trading using opposite Arima Communications and Merry Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arima Communications position performs unexpectedly, Merry Electronics 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 Merry Electronics will offset losses from the drop in Merry Electronics' long position.| Arima Communications vs. Silitech Technology Corp | Arima Communications vs. Merry Electronics Co | Arima Communications vs. Cheng Uei Precision | Arima Communications vs. Wistron NeWeb Corp |
| Merry Electronics vs. Baotek Industrial Materials | Merry Electronics vs. ReaLy Development Construction | Merry Electronics vs. Chung Hsin Electric Machinery | Merry Electronics vs. Chien Kuo Construction |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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