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

0.48

Correlation Coefficient

Pro Real  Melcor Real

Very weak diversification

The 3 months correlation between Pro and Melcor is 0.48. 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 is expected to generate 9.12 times less return on investment than Melcor Real. But when comparing it to its historical volatility, Pro Real Estate is 4.06 times less risky than Melcor Real. It trades about 0.08 of its potential returns per unit of risk. Melcor Real Estate is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  300.00  in Melcor Real Estate on September 3, 2024 and sell it today you would earn a total of  225.00  from holding Melcor Real Estate or generate 75.0% return on investment over 90 days.

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

Pro Real Estate  vs.  Melcor Real Estate

Pro Real Estate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Real Estate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pro Real may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Melcor Real Estate

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Melcor Real Estate are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Melcor Real unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.