Correlation Between KDA and Melcor Developments

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

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

Diversification Opportunities for KDA and Melcor Developments

-0.15

Correlation Coefficient

KDA  Melcor Developments

Good diversification

The 3 months correlation between KDA and Melcor is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and Melcor Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Developments and KDA 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 KDA Group 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 KDA i.e., KDA and Melcor Developments go up and down completely randomly.

Pair Corralation between KDA and Melcor Developments

Assuming the 90 days horizon KDA Group is expected to under-perform the Melcor Developments. In addition to that, KDA is 3.65 times more volatile than Melcor Developments. It trades about -0.02 of its total potential returns per unit of risk. Melcor Developments is currently generating about -0.02 per unit of volatility. If you would invest  1,250  in Melcor Developments on December 20, 2024 and sell it today you would lose (27.00) from holding Melcor Developments or give up 2.16% of portfolio value over 90 days.

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

KDA Group  vs.  Melcor Developments

KDA Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days KDA Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, KDA is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated 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 KDA and Melcor Developments

The main advantage of trading using opposite KDA and Melcor Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KDA 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 KDA Group 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..