Correlation Between Melrose Industries and Greenland Acquisition

Can any of the company-specific risk be diversified away by investing in both Melrose Industries and Greenland Acquisition 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 Greenland Acquisition 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 Greenland Acquisition Corp, you can compare the effects of market volatilities on Melrose Industries and Greenland Acquisition 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 Greenland Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melrose Industries and Greenland Acquisition.

Diversification Opportunities for Melrose Industries and Greenland Acquisition

-0.47

Correlation Coefficient

Melrose Industries  Greenland Acquisition

Very good diversification

The 3 months correlation between Melrose and Greenland is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Melrose Industries PLC and Greenland Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenland Acquisition 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 Greenland Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenland Acquisition has no effect on the direction of Melrose Industries i.e., Melrose Industries and Greenland Acquisition go up and down completely randomly.

Pair Corralation between Melrose Industries and Greenland Acquisition

Assuming the 90 days horizon Melrose Industries PLC is expected to generate 1.05 times more return on investment than Greenland Acquisition. However, Melrose Industries is 1.05 times more volatile than Greenland Acquisition Corp. It trades about 0.09 of its potential returns per unit of risk. Greenland Acquisition Corp is currently generating about -0.16 per unit of risk. If you would invest  600.00  in Melrose Industries PLC on September 26, 2024 and sell it today you would earn a total of  81.00  from holding Melrose Industries PLC or generate 13.5% return on investment over 90 days.

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

Melrose Industries PLC  vs.  Greenland Acquisition Corp

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.

Greenland Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greenland Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Melrose Industries and Greenland Acquisition

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

The idea behind Melrose Industries PLC and Greenland Acquisition Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.