Correlation Between Marfrig Global and Melrose Industries

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

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

Diversification Opportunities for Marfrig Global and Melrose Industries

0.81

Correlation Coefficient

Marfrig Global  Melrose Industries

Very poor diversification

The 3 months correlation between Marfrig and Melrose is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and Melrose Industries PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melrose Industries PLC and Marfrig Global 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 Marfrig Global Foods are associated (or correlated) with Melrose Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melrose Industries PLC has no effect on the direction of Marfrig Global i.e., Marfrig Global and Melrose Industries go up and down completely randomly.

Pair Corralation between Marfrig Global and Melrose Industries

Assuming the 90 days horizon Marfrig Global Foods is expected to under-perform the Melrose Industries. In addition to that, Marfrig Global is 1.31 times more volatile than Melrose Industries PLC. It trades about -0.17 of its total potential returns per unit of risk. Melrose Industries PLC is currently generating about 0.0 per unit of volatility. If you would invest  718.00  in Melrose Industries PLC on September 28, 2024 and sell it today you would lose (10.00) from holding Melrose Industries PLC or give up 1.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Marfrig Global Foods  vs.  Melrose Industries PLC

Marfrig Global Foods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Marfrig Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Melrose Industries PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Melrose Industries PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Melrose Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marfrig Global and Melrose Industries

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

The idea behind Marfrig Global Foods and Melrose Industries 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.