Correlation Between Shapeways Holdings, and Melrose Industries

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

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

Diversification Opportunities for Shapeways Holdings, and Melrose Industries

-0.29

Correlation Coefficient

Shapeways Holdings,  Melrose Industries

Very good diversification

The 3 months correlation between Shapeways and Melrose is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Shapeways Holdings, Common 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 Shapeways 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 Shapeways Holdings, Common 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 Shapeways Holdings, i.e., Shapeways Holdings, and Melrose Industries go up and down completely randomly.

Pair Corralation between Shapeways Holdings, and Melrose Industries

Given the investment horizon of 90 days Shapeways Holdings, Common is expected to generate 30.31 times more return on investment than Melrose Industries. However, Shapeways Holdings, is 30.31 times more volatile than Melrose Industries PLC. It trades about 0.1 of its potential returns per unit of risk. Melrose Industries PLC is currently generating about 0.02 per unit of risk. If you would invest  71.00  in Shapeways Holdings, Common on September 26, 2024 and sell it today you would lose (70.99) from holding Shapeways Holdings, Common or give up 99.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Shapeways Holdings, Common  vs.  Melrose Industries PLC

Shapeways Holdings,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shapeways Holdings, Common are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Shapeways Holdings, showed solid returns over the last few months and may actually be approaching a breakup point.

Melrose Industries PLC

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Melrose Industries PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Melrose Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shapeways Holdings, and Melrose Industries

The main advantage of trading using opposite Shapeways Holdings, and Melrose Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shapeways Holdings, 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 Shapeways Holdings, Common 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.