Correlation Between PIE Industrial and Melewar Industrial

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

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

Diversification Opportunities for PIE Industrial and Melewar Industrial

-0.55

Correlation Coefficient

PIE Industrial  Melewar Industrial

Excellent diversification

The 3 months correlation between PIE and Melewar is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding PIE Industrial Bhd and Melewar Industrial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melewar Industrial and PIE 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 PIE Industrial Bhd 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 PIE Industrial i.e., PIE Industrial and Melewar Industrial go up and down completely randomly.

Pair Corralation between PIE Industrial and Melewar Industrial

Assuming the 90 days trading horizon PIE Industrial Bhd is expected to generate 0.92 times more return on investment than Melewar Industrial. However, PIE Industrial Bhd is 1.09 times less risky than Melewar Industrial. It trades about 0.07 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  540.00  in PIE Industrial Bhd on September 3, 2024 and sell it today you would earn a total of  45.00  from holding PIE Industrial Bhd or generate 8.33% return on investment over 90 days.

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

PIE Industrial Bhd  vs.  Melewar Industrial Group

PIE Industrial Bhd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PIE Industrial Bhd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, PIE Industrial may actually be approaching a critical reversion point that can send shares even higher in January 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 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 PIE Industrial and Melewar Industrial

The main advantage of trading using opposite PIE Industrial and Melewar Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIE Industrial 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 PIE Industrial Bhd 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.