Correlation Between Pro Real and Melcor Real

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

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

Diversification Opportunities for Pro Real and Melcor Real

-0.39

Correlation Coefficient

Pro Real  Melcor Real

Very good diversification

The 3 months correlation between Pro and Melcor is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pro Real Estate and Melcor Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Real Estate and Pro Real 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 Pro Real Estate are associated (or correlated) with Melcor Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melcor Real Estate has no effect on the direction of Pro Real i.e., Pro Real and Melcor Real go up and down completely randomly.

Pair Corralation between Pro Real and Melcor Real

Assuming the 90 days trading horizon Pro Real Estate is expected to under-perform the Melcor Real. In addition to that, Pro Real is 1.94 times more volatile than Melcor Real Estate. It trades about -0.04 of its total potential returns per unit of risk. Melcor Real Estate is currently generating about 0.14 per unit of volatility. If you would invest  517.00  in Melcor Real Estate on December 22, 2024 and sell it today you would earn a total of  27.00  from holding Melcor Real Estate or generate 5.22% return on investment over 90 days.

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

Pro Real Estate  vs.  Melcor Real Estate

Pro Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pro Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Pro Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Melcor Real Estate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Melcor Real Estate are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Melcor Real is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pro Real and Melcor Real

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

The idea behind Pro Real Estate and Melcor Real Estate 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.