Correlation Between NI Holdings and Melar Acquisition

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

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

Diversification Opportunities for NI Holdings and Melar Acquisition

0.09

Correlation Coefficient

NI Holdings  Melar Acquisition

Significant diversification

The 3 months correlation between NODK and Melar is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Melar Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melar Acquisition Corp and NI Holdings 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 NI Holdings are associated (or correlated) with Melar Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melar Acquisition Corp has no effect on the direction of NI Holdings i.e., NI Holdings and Melar Acquisition go up and down completely randomly.

Pair Corralation between NI Holdings and Melar Acquisition

Given the investment horizon of 90 days NI Holdings is expected to generate 7.0 times less return on investment than Melar Acquisition. But when comparing it to its historical volatility, NI Holdings is 3.57 times less risky than Melar Acquisition. It trades about 0.11 of its potential returns per unit of risk. Melar Acquisition Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  9.01  in Melar Acquisition Corp on September 20, 2024 and sell it today you would earn a total of  1.99  from holding Melar Acquisition Corp or generate 22.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

NI Holdings  vs.  Melar Acquisition Corp

NI Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, NI Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Melar Acquisition Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Melar Acquisition Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Melar Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NI Holdings and Melar Acquisition

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

The idea behind NI Holdings and Melar Acquisition Corp 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.