Correlation Between Genesis Land and Melcor Developments

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

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

Diversification Opportunities for Genesis Land and Melcor Developments

0.48

Correlation Coefficient

Genesis Land  Melcor Developments

Very weak diversification

The 3 months correlation between Genesis and Melcor is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Genesis Land Development and Melcor Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Developments and Genesis Land 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 Genesis Land Development 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 Genesis Land i.e., Genesis Land and Melcor Developments go up and down completely randomly.

Pair Corralation between Genesis Land and Melcor Developments

Assuming the 90 days trading horizon Genesis Land Development is expected to under-perform the Melcor Developments. But the stock apears to be less risky and, when comparing its historical volatility, Genesis Land Development is 1.01 times less risky than Melcor Developments. The stock trades about -0.02 of its potential returns per unit of risk. The Melcor Developments is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,268  in Melcor Developments on December 30, 2024 and sell it today you would lose (22.00) from holding Melcor Developments or give up 1.74% of portfolio value over 90 days.

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

Genesis Land Development  vs.  Melcor Developments

Genesis Land Development

Risk-Adjusted Performance

Very Weak

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

The main advantage of trading using opposite Genesis Land and Melcor Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genesis Land 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 Genesis Land Development 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.