Correlation Between Melexis NV and ABO

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

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

Diversification Opportunities for Melexis NV and ABO

-0.07

Correlation Coefficient

Melexis NV  ABO

Good diversification

The 3 months correlation between Melexis and ABO is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Melexis NV and ABO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABO Group and Melexis NV 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 Melexis NV are associated (or correlated) with ABO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABO Group has no effect on the direction of Melexis NV i.e., Melexis NV and ABO go up and down completely randomly.

Pair Corralation between Melexis NV and ABO

Assuming the 90 days trading horizon Melexis NV is expected to generate 2.44 times more return on investment than ABO. However, Melexis NV is 2.44 times more volatile than ABO Group. It trades about 0.06 of its potential returns per unit of risk. ABO Group is currently generating about -0.21 per unit of risk. If you would invest  5,485  in Melexis NV on December 20, 2024 and sell it today you would earn a total of  390.00  from holding Melexis NV or generate 7.11% return on investment over 90 days.

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

Melexis NV  vs.  ABO Group

Melexis NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Melexis NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Melexis NV may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ABO Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days ABO Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Melexis NV and ABO

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

The idea behind Melexis NV and ABO Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.