Correlation Between Semler Scientific and Melrose Industries

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

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

Diversification Opportunities for Semler Scientific and Melrose Industries

0.85

Correlation Coefficient

Semler Scientific  Melrose Industries

Very poor diversification

The 3 months correlation between Semler and Melrose is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Semler Scientific 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 Semler Scientific 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 Semler Scientific 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 Semler Scientific i.e., Semler Scientific and Melrose Industries go up and down completely randomly.

Pair Corralation between Semler Scientific and Melrose Industries

Given the investment horizon of 90 days Semler Scientific is expected to generate 1.66 times more return on investment than Melrose Industries. However, Semler Scientific is 1.66 times more volatile than Melrose Industries PLC. It trades about 0.12 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  3,440  in Semler Scientific on September 26, 2024 and sell it today you would earn a total of  3,688  from holding Semler Scientific or generate 107.21% return on investment over 90 days.

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

Semler Scientific  vs.  Melrose Industries PLC

Semler Scientific

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semler Scientific are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Semler Scientific reported 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 Semler Scientific and Melrose Industries

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