Correlation Between Melrose Industries and Hudson Acquisition

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

Diversification Opportunities for Melrose Industries and Hudson Acquisition

0.0

Correlation Coefficient

Melrose Industries  Hudson Acquisition

Pay attention - limited upside

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

Pair Corralation between Melrose Industries and Hudson Acquisition

If you would invest  1,256  in Hudson Acquisition I on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Hudson Acquisition I or generate 0.0% return on investment over 90 days.

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

Melrose Industries PLC  vs.  Hudson Acquisition I

Melrose Industries PLC

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Melrose Industries PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Melrose Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Hudson Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Acquisition I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Hudson Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Melrose Industries and Hudson Acquisition

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

The idea behind Melrose Industries PLC and Hudson Acquisition I 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.