Correlation Between Merida Industry and I Hwa

Can any of the company-specific risk be diversified away by investing in both Merida Industry and I Hwa 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 I Hwa 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 I Hwa Industrial Co, you can compare the effects of market volatilities on Merida Industry and I Hwa 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 I Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merida Industry and I Hwa.

Diversification Opportunities for Merida Industry and I Hwa

0.43

Correlation Coefficient

Merida Industry  I Hwa

Very weak diversification

The 3 months correlation between Merida and 1456 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and I Hwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Hwa Industrial 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 I Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Hwa Industrial has no effect on the direction of Merida Industry i.e., Merida Industry and I Hwa go up and down completely randomly.

Pair Corralation between Merida Industry and I Hwa

Assuming the 90 days trading horizon Merida Industry Co is expected to under-perform the I Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Merida Industry Co is 1.21 times less risky than I Hwa. The stock trades about -0.1 of its potential returns per unit of risk. The I Hwa Industrial Co is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,975  in I Hwa Industrial Co on September 29, 2024 and sell it today you would lose (430.00) from holding I Hwa Industrial Co or give up 21.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Merida Industry Co  vs.  I Hwa Industrial Co

Merida Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merida Industry Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

I Hwa Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days I Hwa Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Merida Industry and I Hwa

The main advantage of trading using opposite Merida Industry and I Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merida Industry position performs unexpectedly, I Hwa 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 I Hwa will offset losses from the drop in I Hwa's long position.

The idea behind Merida Industry Co and I Hwa Industrial Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.