Correlation Between ES Ceramics and Melewar Industrial

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

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

Diversification Opportunities for ES Ceramics and Melewar Industrial

-0.3

Correlation Coefficient

ES Ceramics  Melewar Industrial

Very good diversification

The 3 months correlation between 0100 and Melewar is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics 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 ES Ceramics 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 ES Ceramics 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 ES Ceramics i.e., ES Ceramics and Melewar Industrial go up and down completely randomly.

Pair Corralation between ES Ceramics and Melewar Industrial

Assuming the 90 days trading horizon ES Ceramics Technology is expected to generate 1.28 times more return on investment than Melewar Industrial. However, ES Ceramics is 1.28 times more volatile than Melewar Industrial Group. It trades about 0.01 of its potential returns per unit of risk. Melewar Industrial Group is currently generating about 0.0 per unit of risk. If you would invest  20.00  in ES Ceramics Technology on October 11, 2024 and sell it today you would lose (4.00) from holding ES Ceramics Technology or give up 20.0% of portfolio value over 90 days.

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

ES Ceramics Technology  vs.  Melewar Industrial Group

ES Ceramics Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ES Ceramics Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, ES Ceramics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Melewar Industrial

Risk-Adjusted Performance

0 of 100

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 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.

Pair Trading with ES Ceramics and Melewar Industrial

The main advantage of trading using opposite ES Ceramics and Melewar Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ES Ceramics 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 ES Ceramics 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.