Correlation Between Melewar Industrial and Padini Holdings

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

By analyzing existing cross correlation between Melewar Industrial Group and Padini Holdings Bhd, you can compare the effects of market volatilities on Melewar Industrial and Padini Holdings 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 Melewar Industrial with a short position of Padini Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Melewar Industrial and Padini Holdings.

Diversification Opportunities for Melewar Industrial and Padini Holdings

0.43

Correlation Coefficient

Melewar Industrial  Padini Holdings

Very weak diversification

The 3 months correlation between Melewar and Padini is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Melewar Industrial Group and Padini Holdings Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Padini Holdings Bhd and Melewar Industrial 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 Melewar Industrial Group are associated (or correlated) with Padini Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Padini Holdings Bhd has no effect on the direction of Melewar Industrial i.e., Melewar Industrial and Padini Holdings go up and down completely randomly.

Pair Corralation between Melewar Industrial and Padini Holdings

Assuming the 90 days trading horizon Melewar Industrial Group is expected to under-perform the Padini Holdings. In addition to that, Melewar Industrial is 1.84 times more volatile than Padini Holdings Bhd. It trades about -0.08 of its total potential returns per unit of risk. Padini Holdings Bhd is currently generating about 0.01 per unit of volatility. If you would invest  328.00  in Padini Holdings Bhd on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Padini Holdings Bhd or generate 0.0% return on investment over 90 days.

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

Melewar Industrial Group  vs.  Padini Holdings Bhd

Melewar Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melewar Industrial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Padini Holdings Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Padini Holdings Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Padini Holdings is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Melewar Industrial and Padini Holdings

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

The idea behind Melewar Industrial Group and Padini Holdings Bhd 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.