Correlation Between Meritage Hospitality and Capital Properties

Can any of the company-specific risk be diversified away by investing in both Meritage Hospitality and Capital Properties 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 Meritage Hospitality and Capital Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Meritage Hospitality Group and Capital Properties, you can compare the effects of market volatilities on Meritage Hospitality and Capital Properties 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 Meritage Hospitality with a short position of Capital Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meritage Hospitality and Capital Properties.

Diversification Opportunities for Meritage Hospitality and Capital Properties

0.07

Correlation Coefficient

Meritage Hospitality  Capital Properties

Significant diversification

The 3 months correlation between Meritage and Capital is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Meritage Hospitality Group and Capital Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Properties and Meritage Hospitality 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 Meritage Hospitality Group are associated (or correlated) with Capital Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Properties has no effect on the direction of Meritage Hospitality i.e., Meritage Hospitality and Capital Properties go up and down completely randomly.

Pair Corralation between Meritage Hospitality and Capital Properties

If you would invest  1,200  in Capital Properties on January 30, 2024 and sell it today you would earn a total of  0.00  from holding Capital Properties or generate 0.0% return on investment over 90 days.

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

Meritage Hospitality Group  vs.  Capital Properties

Meritage Hospitality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meritage Hospitality Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Capital Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Capital Properties is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Meritage Hospitality and Capital Properties

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

The idea behind Meritage Hospitality Group and Capital Properties 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.