Correlation Between Five Point and Melcor Developments

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

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

Diversification Opportunities for Five Point and Melcor Developments

0.79

Correlation Coefficient

Five Point  Melcor Developments

Poor diversification

The 3 months correlation between Five and Melcor is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Five Point Holdings and Melcor Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Developments and Five Point 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 Five Point Holdings 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 Five Point i.e., Five Point and Melcor Developments go up and down completely randomly.

Pair Corralation between Five Point and Melcor Developments

Considering the 90-day investment horizon Five Point Holdings is expected to generate 1.57 times more return on investment than Melcor Developments. However, Five Point is 1.57 times more volatile than Melcor Developments. It trades about 0.01 of its potential returns per unit of risk. Melcor Developments is currently generating about -0.1 per unit of risk. If you would invest  384.00  in Five Point Holdings on October 8, 2024 and sell it today you would lose (1.00) from holding Five Point Holdings or give up 0.26% of portfolio value over 90 days.

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

Five Point Holdings  vs.  Melcor Developments

Five Point Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Five Point Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Five Point is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Melcor Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melcor Developments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Five Point and Melcor Developments

The main advantage of trading using opposite Five Point and Melcor Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Point 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 Five Point Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.