Correlation Between Melrose Industries and Glacier Bancorp

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

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

Diversification Opportunities for Melrose Industries and Glacier Bancorp

0.71

Correlation Coefficient

Melrose Industries  Glacier Bancorp

Poor diversification

The 3 months correlation between Melrose and Glacier is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Melrose Industries PLC and Glacier Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glacier Bancorp and Melrose Industries 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 Melrose Industries PLC are associated (or correlated) with Glacier Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glacier Bancorp has no effect on the direction of Melrose Industries i.e., Melrose Industries and Glacier Bancorp go up and down completely randomly.

Pair Corralation between Melrose Industries and Glacier Bancorp

Assuming the 90 days horizon Melrose Industries PLC is expected to generate 1.92 times more return on investment than Glacier Bancorp. However, Melrose Industries is 1.92 times more volatile than Glacier Bancorp. It trades about 0.09 of its potential returns per unit of risk. Glacier Bancorp is currently generating about 0.16 per unit of risk. If you would invest  593.00  in Melrose Industries PLC on September 15, 2024 and sell it today you would earn a total of  126.00  from holding Melrose Industries PLC or generate 21.25% return on investment over 90 days.

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

Melrose Industries PLC  vs.  Glacier Bancorp

Melrose Industries PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Melrose Industries PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Melrose Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Glacier Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Glacier Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Glacier Bancorp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Melrose Industries and Glacier Bancorp

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

The idea behind Melrose Industries PLC and Glacier Bancorp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..