Correlation Between Melewar Industrial and ES Ceramics

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

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

Diversification Opportunities for Melewar Industrial and ES Ceramics

-0.09

Correlation Coefficient

Melewar Industrial  ES Ceramics

Good diversification

The 3 months correlation between Melewar and 0100 is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Melewar Industrial Group and ES Ceramics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ES Ceramics Technology and Melewar Industrial 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 Melewar Industrial Group are associated (or correlated) with ES Ceramics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ES Ceramics Technology has no effect on the direction of Melewar Industrial i.e., Melewar Industrial and ES Ceramics go up and down completely randomly.

Pair Corralation between Melewar Industrial and ES Ceramics

Assuming the 90 days trading horizon Melewar Industrial Group is expected to under-perform the ES Ceramics. But the stock apears to be less risky and, when comparing its historical volatility, Melewar Industrial Group is 2.17 times less risky than ES Ceramics. The stock trades about -0.21 of its potential returns per unit of risk. The ES Ceramics Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  15.00  in ES Ceramics Technology on September 27, 2024 and sell it today you would earn a total of  1.00  from holding ES Ceramics Technology or generate 6.67% return on investment over 90 days.

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

Melewar Industrial Group  vs.  ES Ceramics Technology

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 conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

ES Ceramics Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ES Ceramics Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, ES Ceramics is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Melewar Industrial and ES Ceramics

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

The idea behind Melewar Industrial Group and ES Ceramics Technology 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.