Correlation Between Melisron and Norstar

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

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

Diversification Opportunities for Melisron and Norstar

0.9

Correlation Coefficient

Melisron  Norstar

Almost no diversification

The 3 months correlation between Melisron and Norstar is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Melisron and Norstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norstar and Melisron 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 Melisron are associated (or correlated) with Norstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norstar has no effect on the direction of Melisron i.e., Melisron and Norstar go up and down completely randomly.

Pair Corralation between Melisron and Norstar

Assuming the 90 days trading horizon Melisron is expected to generate 2.08 times less return on investment than Norstar. But when comparing it to its historical volatility, Melisron is 1.88 times less risky than Norstar. It trades about 0.26 of its potential returns per unit of risk. Norstar is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  107,600  in Norstar on September 11, 2024 and sell it today you would earn a total of  50,600  from holding Norstar or generate 47.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Melisron  vs.  Norstar

Melisron

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Melisron are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Melisron sustained solid returns over the last few months and may actually be approaching a breakup point.

Norstar

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Norstar are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Norstar sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Melisron and Norstar

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

The idea behind Melisron and Norstar 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.