Correlation Between Meritage and Trinity Place

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

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

Diversification Opportunities for Meritage and Trinity Place

-0.4

Correlation Coefficient

Meritage  Trinity Place

Very good diversification

The 3 months correlation between Meritage and Trinity is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Meritage and Trinity Place Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinity Place Holdings and Meritage 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 are associated (or correlated) with Trinity Place. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinity Place Holdings has no effect on the direction of Meritage i.e., Meritage and Trinity Place go up and down completely randomly.

Pair Corralation between Meritage and Trinity Place

Considering the 90-day investment horizon Meritage is expected to generate 0.57 times more return on investment than Trinity Place. However, Meritage is 1.75 times less risky than Trinity Place. It trades about 0.42 of its potential returns per unit of risk. Trinity Place Holdings is currently generating about 0.02 per unit of risk. If you would invest  15,209  in Meritage on February 16, 2024 and sell it today you would earn a total of  3,469  from holding Meritage or generate 22.81% return on investment over 90 days.

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

Meritage  vs.  Trinity Place Holdings

Meritage

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meritage are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Meritage demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Trinity Place Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Trinity Place Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Trinity Place unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meritage and Trinity Place

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

The idea behind Meritage and Trinity Place Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.