Correlation Between Melrose Industries and Nuburu

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

By analyzing existing cross correlation between Melrose Industries PLC and Nuburu Inc, you can compare the effects of market volatilities on Melrose Industries and Nuburu 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 Melrose Industries with a short position of Nuburu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melrose Industries and Nuburu.

Diversification Opportunities for Melrose Industries and Nuburu

-0.54

Correlation Coefficient

Melrose Industries  Nuburu

Excellent diversification

The 3 months correlation between Melrose and Nuburu is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Melrose Industries PLC and Nuburu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuburu Inc and Melrose Industries 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 Melrose Industries PLC are associated (or correlated) with Nuburu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuburu Inc has no effect on the direction of Melrose Industries i.e., Melrose Industries and Nuburu go up and down completely randomly.

Pair Corralation between Melrose Industries and Nuburu

Assuming the 90 days horizon Melrose Industries is expected to generate 2.36 times less return on investment than Nuburu. But when comparing it to its historical volatility, Melrose Industries PLC is 5.03 times less risky than Nuburu. It trades about 0.09 of its potential returns per unit of risk. Nuburu Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Nuburu Inc on September 26, 2024 and sell it today you would lose (15.00) from holding Nuburu Inc or give up 25.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Melrose Industries PLC  vs.  Nuburu Inc

Melrose Industries PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Melrose Industries PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Melrose Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Nuburu Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuburu Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Nuburu unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Melrose Industries and Nuburu

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

The idea behind Melrose Industries PLC and Nuburu Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.