Correlation Between Melstar Information and General Insurance

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

By analyzing existing cross correlation between Melstar Information Technologies and General Insurance, you can compare the effects of market volatilities on Melstar Information and General Insurance 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 Melstar Information with a short position of General Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melstar Information and General Insurance.

Diversification Opportunities for Melstar Information and General Insurance

0.0

Correlation Coefficient

Melstar Information  General Insurance

Pay attention - limited upside

The 3 months correlation between Melstar and General is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Melstar Information Technologi and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and Melstar Information 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 Melstar Information Technologies are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of Melstar Information i.e., Melstar Information and General Insurance go up and down completely randomly.

Pair Corralation between Melstar Information and General Insurance

Assuming the 90 days trading horizon Melstar Information Technologies is expected to generate 72.63 times more return on investment than General Insurance. However, Melstar Information is 72.63 times more volatile than General Insurance. It trades about 0.21 of its potential returns per unit of risk. General Insurance is currently generating about 0.1 per unit of risk. If you would invest  11,000  in Melstar Information Technologies on October 6, 2024 and sell it today you would lose (10,575) from holding Melstar Information Technologies or give up 96.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.71%
Values	Daily Returns

Melstar Information Technologi  vs.  General Insurance

Melstar Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melstar Information Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Melstar Information is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

General Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Melstar Information and General Insurance

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

The idea behind Melstar Information Technologies and General Insurance 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.