Correlation Between Malvern International and Trellus Health

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

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

Diversification Opportunities for Malvern International and Trellus Health

0.16

Correlation Coefficient

Malvern International  Trellus Health

Average diversification

The 3 months correlation between Malvern and Trellus is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Malvern International and Trellus Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trellus Health plc and Malvern International 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 Malvern International are associated (or correlated) with Trellus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trellus Health plc has no effect on the direction of Malvern International i.e., Malvern International and Trellus Health go up and down completely randomly.

Pair Corralation between Malvern International and Trellus Health

Assuming the 90 days trading horizon Malvern International is expected to generate 270.09 times less return on investment than Trellus Health. But when comparing it to its historical volatility, Malvern International is 46.53 times less risky than Trellus Health. It trades about 0.02 of its potential returns per unit of risk. Trellus Health plc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Trellus Health plc on December 26, 2024 and sell it today you would earn a total of  103.00  from holding Trellus Health plc or generate 180.7% return on investment over 90 days.

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

Malvern International  vs.  Trellus Health plc

Malvern International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Malvern International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Malvern International is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Trellus Health plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trellus Health plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Trellus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Malvern International and Trellus Health

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

The idea behind Malvern International and Trellus Health plc 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.