Correlation Between Meritage Homes and ESSILORLUXOTTICA

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

By analyzing existing cross correlation between Meritage Homes and ESSILORLUXOTTICA 12ON, you can compare the effects of market volatilities on Meritage Homes and ESSILORLUXOTTICA 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 Homes with a short position of ESSILORLUXOTTICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meritage Homes and ESSILORLUXOTTICA.

Diversification Opportunities for Meritage Homes and ESSILORLUXOTTICA

0.22

Correlation Coefficient

Meritage Homes  ESSILORLUXOTTICA

Modest diversification

The 3 months correlation between Meritage and ESSILORLUXOTTICA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Meritage Homes and ESSILORLUXOTTICA 12ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSILORLUXOTTICA 12ON and Meritage Homes 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 Homes are associated (or correlated) with ESSILORLUXOTTICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSILORLUXOTTICA 12ON has no effect on the direction of Meritage Homes i.e., Meritage Homes and ESSILORLUXOTTICA go up and down completely randomly.

Pair Corralation between Meritage Homes and ESSILORLUXOTTICA

Assuming the 90 days horizon Meritage Homes is expected to generate 1.11 times more return on investment than ESSILORLUXOTTICA. However, Meritage Homes is 1.11 times more volatile than ESSILORLUXOTTICA 12ON. It trades about 0.07 of its potential returns per unit of risk. ESSILORLUXOTTICA 12ON is currently generating about 0.03 per unit of risk. If you would invest  5,513  in Meritage Homes on April 22, 2025 and sell it today you would earn a total of  537.00  from holding Meritage Homes or generate 9.74% return on investment over 90 days.

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

Meritage Homes  vs.  ESSILORLUXOTTICA 12ON

Meritage Homes

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Meritage Homes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meritage Homes may actually be approaching a critical reversion point that can send shares even higher in August 2025.

ESSILORLUXOTTICA 12ON

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESSILORLUXOTTICA 12ON are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, ESSILORLUXOTTICA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Meritage Homes and ESSILORLUXOTTICA

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

The idea behind Meritage Homes and ESSILORLUXOTTICA 12ON 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.