Correlation Between Merida Industry and Gourmet Master

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

Diversification Opportunities for Merida Industry and Gourmet Master

-0.76

Correlation Coefficient

Merida Industry  Gourmet Master

Pay attention - limited upside

The 3 months correlation between Merida and Gourmet is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Gourmet Master Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gourmet Master 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 Gourmet Master. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gourmet Master has no effect on the direction of Merida Industry i.e., Merida Industry and Gourmet Master go up and down completely randomly.

Pair Corralation between Merida Industry and Gourmet Master

Assuming the 90 days trading horizon Merida Industry Co is expected to under-perform the Gourmet Master. In addition to that, Merida Industry is 1.27 times more volatile than Gourmet Master Co. It trades about -0.28 of its total potential returns per unit of risk. Gourmet Master Co is currently generating about 0.14 per unit of volatility. If you would invest  8,190  in Gourmet Master Co on September 3, 2024 and sell it today you would earn a total of  1,320  from holding Gourmet Master Co or generate 16.12% return on investment over 90 days.

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

Merida Industry Co  vs.  Gourmet Master 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.

Gourmet Master

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gourmet Master Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gourmet Master showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merida Industry and Gourmet Master

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

The idea behind Merida Industry Co and Gourmet Master 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.