Correlation Between Merida Industry and Taiwan Hon
Can any of the company-specific risk be diversified away by investing in both Merida Industry and Taiwan Hon 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 Taiwan Hon 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 Taiwan Hon Chuan, you can compare the effects of market volatilities on Merida Industry and Taiwan Hon 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 Taiwan Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merida Industry and Taiwan Hon.
Diversification Opportunities for Merida Industry and Taiwan Hon
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Merida and Taiwan is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Taiwan Hon Chuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hon Chuan 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 Taiwan Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hon Chuan has no effect on the direction of Merida Industry i.e., Merida Industry and Taiwan Hon go up and down completely randomly.
Pair Corralation between Merida Industry and Taiwan Hon
Assuming the 90 days trading horizon Merida Industry Co is expected to under-perform the Taiwan Hon. In addition to that, Merida Industry is 1.77 times more volatile than Taiwan Hon Chuan. It trades about -0.19 of its total potential returns per unit of risk. Taiwan Hon Chuan is currently generating about -0.13 per unit of volatility. If you would invest 15,300 in Taiwan Hon Chuan on September 1, 2024 and sell it today you would lose (600.00) from holding Taiwan Hon Chuan or give up 3.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Merida Industry Co vs. Taiwan Hon Chuan
Performance |
| Timeline |
| Merida Industry |
| Taiwan Hon Chuan |
Merida Industry and Taiwan Hon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merida Industry and Taiwan Hon
The main advantage of trading using opposite Merida Industry and Taiwan Hon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merida Industry position performs unexpectedly, Taiwan Hon 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 Hon will offset losses from the drop in Taiwan Hon's long position.| Merida Industry vs. Chaintech Technology Corp | Merida Industry vs. AVerMedia Technologies | Merida Industry vs. Avision | Merida Industry vs. Clevo Co |
| Taiwan Hon vs. Connection Technology Systems | Taiwan Hon vs. Nova Technology | Taiwan Hon vs. Advanced Wireless Semiconductor | Taiwan Hon vs. STL Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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