Correlation Between Merida Industry and Fusheng Precision
Can any of the company-specific risk be diversified away by investing in both Merida Industry and Fusheng Precision 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 Merida Industry and Fusheng Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merida Industry Co and Fusheng Precision Co, you can compare the effects of market volatilities on Merida Industry and Fusheng Precision 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 Merida Industry with a short position of Fusheng Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merida Industry and Fusheng Precision.
Diversification Opportunities for Merida Industry and Fusheng Precision
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Merida and Fusheng is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Fusheng Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fusheng Precision and Merida Industry 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 Merida Industry Co are associated (or correlated) with Fusheng Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fusheng Precision has no effect on the direction of Merida Industry i.e., Merida Industry and Fusheng Precision go up and down completely randomly.
Pair Corralation between Merida Industry and Fusheng Precision
Assuming the 90 days trading horizon Merida Industry Co is expected to under-perform the Fusheng Precision. In addition to that, Merida Industry is 1.12 times more volatile than Fusheng Precision Co. It trades about -0.39 of its total potential returns per unit of risk. Fusheng Precision Co is currently generating about 0.17 per unit of volatility. If you would invest 29,250 in Fusheng Precision Co on August 26, 2024 and sell it today you would earn a total of 1,950 from holding Fusheng Precision Co or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merida Industry Co vs. Fusheng Precision Co
Performance |
| Timeline |
| Merida Industry |
| Fusheng Precision |
Merida Industry and Fusheng Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merida Industry and Fusheng Precision
The main advantage of trading using opposite Merida Industry and Fusheng Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merida Industry position performs unexpectedly, Fusheng Precision 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 Fusheng Precision will offset losses from the drop in Fusheng Precision's long position.| Merida Industry vs. Taiwan Semiconductor Manufacturing | Merida Industry vs. Hon Hai Precision | Merida Industry vs. MediaTek | Merida Industry vs. Chunghwa Telecom Co |
| Fusheng Precision vs. Giant Manufacturing Co | Fusheng Precision vs. Johnson Health Tech | Fusheng Precision vs. Sports Gear Co | Fusheng Precision vs. Power Wind Health |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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