Correlation Between Moelis and Netcapital

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

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

Diversification Opportunities for Moelis and Netcapital

-0.25

Correlation Coefficient

Moelis  Netcapital

Very good diversification

The 3 months correlation between Moelis and Netcapital is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Moelis Co and Netcapital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcapital 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 Netcapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcapital has no effect on the direction of Moelis i.e., Moelis and Netcapital go up and down completely randomly.

Pair Corralation between Moelis and Netcapital

Allowing for the 90-day total investment horizon Moelis Co is expected to generate 0.44 times more return on investment than Netcapital. However, Moelis Co is 2.3 times less risky than Netcapital. It trades about 0.1 of its potential returns per unit of risk. Netcapital is currently generating about -0.01 per unit of risk. If you would invest  6,377  in Moelis Co on September 7, 2024 and sell it today you would earn a total of  1,148  from holding Moelis Co or generate 18.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Moelis Co  vs.  Netcapital

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 weak fundamental indicators, Moelis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Netcapital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Netcapital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Netcapital is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Moelis and Netcapital

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

The idea behind Moelis Co and Netcapital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.