Correlation Between Melrose Industries and Hurco Companies

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

Diversification Opportunities for Melrose Industries and Hurco Companies

0.29

Correlation Coefficient

Melrose Industries  Hurco Companies

Modest diversification

The 3 months correlation between Melrose and Hurco is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Melrose Industries PLC and Hurco Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hurco Companies 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 Hurco Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hurco Companies has no effect on the direction of Melrose Industries i.e., Melrose Industries and Hurco Companies go up and down completely randomly.

Pair Corralation between Melrose Industries and Hurco Companies

Assuming the 90 days horizon Melrose Industries PLC is expected to generate 1.74 times more return on investment than Hurco Companies. However, Melrose Industries is 1.74 times more volatile than Hurco Companies. It trades about 0.09 of its potential returns per unit of risk. Hurco Companies is currently generating about -0.13 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 Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Melrose Industries PLC  vs.  Hurco Companies

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.

Hurco Companies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hurco Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Hurco Companies is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Melrose Industries and Hurco Companies

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

The idea behind Melrose Industries PLC and Hurco Companies 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.