Correlation Between Tex Cycle and Melewar Industrial

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

By analyzing existing cross correlation between Tex Cycle Technology and Melewar Industrial Group, you can compare the effects of market volatilities on Tex Cycle and Melewar Industrial 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 Tex Cycle with a short position of Melewar Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tex Cycle and Melewar Industrial.

Diversification Opportunities for Tex Cycle and Melewar Industrial

0.77

Correlation Coefficient

Tex Cycle  Melewar Industrial

Poor diversification

The 3 months correlation between Tex and Melewar is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tex Cycle Technology and Melewar Industrial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melewar Industrial and Tex Cycle 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 Tex Cycle Technology are associated (or correlated) with Melewar Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melewar Industrial has no effect on the direction of Tex Cycle i.e., Tex Cycle and Melewar Industrial go up and down completely randomly.

Pair Corralation between Tex Cycle and Melewar Industrial

Assuming the 90 days trading horizon Tex Cycle Technology is expected to generate 0.49 times more return on investment than Melewar Industrial. However, Tex Cycle Technology is 2.06 times less risky than Melewar Industrial. It trades about -0.09 of its potential returns per unit of risk. Melewar Industrial Group is currently generating about -0.08 per unit of risk. If you would invest  112.00  in Tex Cycle Technology on December 23, 2024 and sell it today you would lose (8.00) from holding Tex Cycle Technology or give up 7.14% of portfolio value over 90 days.

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

Tex Cycle Technology  vs.  Melewar Industrial Group

Tex Cycle Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tex Cycle Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Melewar Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Melewar Industrial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Tex Cycle and Melewar Industrial

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

The idea behind Tex Cycle Technology and Melewar Industrial Group 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.