Correlation Between Moelis and Computershare

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

By analyzing existing cross correlation between Moelis Co and Computershare Ltd ADR, you can compare the effects of market volatilities on Moelis and Computershare 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 Moelis with a short position of Computershare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moelis and Computershare.

Diversification Opportunities for Moelis and Computershare

0.66

Correlation Coefficient

Moelis  Computershare

Poor diversification

The 3 months correlation between Moelis and Computershare is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Moelis Co and Computershare Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computershare ADR and Moelis 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 Moelis Co are associated (or correlated) with Computershare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computershare ADR has no effect on the direction of Moelis i.e., Moelis and Computershare go up and down completely randomly.

Pair Corralation between Moelis and Computershare

Allowing for the 90-day total investment horizon Moelis Co is expected to generate 1.39 times more return on investment than Computershare. However, Moelis is 1.39 times more volatile than Computershare Ltd ADR. It trades about 0.06 of its potential returns per unit of risk. Computershare Ltd ADR is currently generating about 0.05 per unit of risk. If you would invest  4,442  in Moelis Co on October 26, 2024 and sell it today you would earn a total of  3,362  from holding Moelis Co or generate 75.69% return on investment over 90 days.

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

Moelis Co  vs.  Computershare Ltd ADR

Moelis

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moelis Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Moelis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Computershare ADR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Ltd ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Computershare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moelis and Computershare

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

The idea behind Moelis Co and Computershare Ltd ADR 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.