Correlation Between YTL Hospitality and Melewar Industrial

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

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

Diversification Opportunities for YTL Hospitality and Melewar Industrial

-0.03

Correlation Coefficient

YTL Hospitality  Melewar Industrial

Good diversification

The 3 months correlation between YTL and Melewar is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding YTL Hospitality REIT and Melewar Industrial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melewar Industrial and YTL Hospitality 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 YTL Hospitality REIT 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 YTL Hospitality i.e., YTL Hospitality and Melewar Industrial go up and down completely randomly.

Pair Corralation between YTL Hospitality and Melewar Industrial

Assuming the 90 days trading horizon YTL Hospitality REIT is expected to generate 0.41 times more return on investment than Melewar Industrial. However, YTL Hospitality REIT is 2.47 times less risky than Melewar Industrial. It trades about 0.03 of its potential returns per unit of risk. Melewar Industrial Group is currently generating about -0.11 per unit of risk. If you would invest  118.00  in YTL Hospitality REIT on September 3, 2024 and sell it today you would earn a total of  2.00  from holding YTL Hospitality REIT or generate 1.69% return on investment over 90 days.

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

YTL Hospitality REIT  vs.  Melewar Industrial Group

YTL Hospitality REIT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in YTL Hospitality REIT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, YTL Hospitality is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with YTL Hospitality and Melewar Industrial

The main advantage of trading using opposite YTL Hospitality and Melewar Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YTL Hospitality 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 YTL Hospitality REIT 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.