Correlation Between Boardwalk Real and Melcor Developments

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

By analyzing existing cross correlation between Boardwalk Real Estate and Melcor Developments, you can compare the effects of market volatilities on Boardwalk Real and Melcor Developments 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 Boardwalk Real with a short position of Melcor Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boardwalk Real and Melcor Developments.

Diversification Opportunities for Boardwalk Real and Melcor Developments

0.44

Correlation Coefficient

Boardwalk Real  Melcor Developments

Very weak diversification

The 3 months correlation between Boardwalk and Melcor is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Boardwalk Real Estate and Melcor Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Developments and Boardwalk Real 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 Boardwalk Real Estate are associated (or correlated) with Melcor Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melcor Developments has no effect on the direction of Boardwalk Real i.e., Boardwalk Real and Melcor Developments go up and down completely randomly.

Pair Corralation between Boardwalk Real and Melcor Developments

Assuming the 90 days trading horizon Boardwalk Real Estate is expected to under-perform the Melcor Developments. In addition to that, Boardwalk Real is 1.1 times more volatile than Melcor Developments. It trades about -0.11 of its total potential returns per unit of risk. Melcor Developments is currently generating about -0.01 per unit of volatility. If you would invest  1,280  in Melcor Developments on December 3, 2024 and sell it today you would lose (11.00) from holding Melcor Developments or give up 0.86% of portfolio value over 90 days.

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

Boardwalk Real Estate  vs.  Melcor Developments

Boardwalk Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boardwalk Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Melcor Developments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Melcor Developments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Melcor Developments is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Boardwalk Real and Melcor Developments

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

The idea behind Boardwalk Real Estate and Melcor Developments 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..