Correlation Between Merida Industry and Holiday Entertainment

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

Diversification Opportunities for Merida Industry and Holiday Entertainment

0.9

Correlation Coefficient

Merida Industry  Holiday Entertainment

Almost no diversification

The 3 months correlation between Merida and Holiday is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Merida Industry Co and Holiday Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holiday Entertainment 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 Holiday Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holiday Entertainment has no effect on the direction of Merida Industry i.e., Merida Industry and Holiday Entertainment go up and down completely randomly.

Pair Corralation between Merida Industry and Holiday Entertainment

Assuming the 90 days trading horizon Merida Industry Co is expected to under-perform the Holiday Entertainment. In addition to that, Merida Industry is 4.47 times more volatile than Holiday Entertainment Co. It trades about -0.31 of its total potential returns per unit of risk. Holiday Entertainment Co is currently generating about -0.18 per unit of volatility. If you would invest  8,340  in Holiday Entertainment Co on September 27, 2024 and sell it today you would lose (430.00) from holding Holiday Entertainment Co or give up 5.16% of portfolio value over 90 days.

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

Merida Industry Co  vs.  Holiday Entertainment 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.

Holiday Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holiday Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Holiday Entertainment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Merida Industry and Holiday Entertainment

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

The idea behind Merida Industry Co and Holiday Entertainment 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.

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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 Stocks Directory module to find actively traded stocks across global markets.