Correlation Between Dream Unlimited and Melcor Developments

Can any of the company-specific risk be diversified away by investing in both Dream Unlimited and Melcor Developments 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 Dream Unlimited and Melcor Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dream Unlimited Corp and Melcor Developments, you can compare the effects of market volatilities on Dream Unlimited and Melcor Developments 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 Dream Unlimited with a short position of Melcor Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Unlimited and Melcor Developments.

Diversification Opportunities for Dream Unlimited and Melcor Developments

0.68

Correlation Coefficient

Dream Unlimited  Melcor Developments

Poor diversification

The 3 months correlation between Dream and Melcor is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dream Unlimited Corp and Melcor Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Developments and Dream Unlimited 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 Dream Unlimited Corp are associated (or correlated) with Melcor Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melcor Developments has no effect on the direction of Dream Unlimited i.e., Dream Unlimited and Melcor Developments go up and down completely randomly.

Pair Corralation between Dream Unlimited and Melcor Developments

Assuming the 90 days trading horizon Dream Unlimited Corp is expected to generate 1.0 times more return on investment than Melcor Developments. However, Dream Unlimited is 1.0 times more volatile than Melcor Developments. It trades about 0.2 of its potential returns per unit of risk. Melcor Developments is currently generating about 0.19 per unit of risk. If you would invest  1,783  in Dream Unlimited Corp on April 20, 2025 and sell it today you would earn a total of  385.00  from holding Dream Unlimited Corp or generate 21.59% return on investment over 90 days.

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

Dream Unlimited Corp  vs.  Melcor Developments

Dream Unlimited Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Unlimited Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Dream Unlimited displayed solid returns over the last few months and may actually be approaching a breakup point.

Melcor Developments

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Melcor Developments are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Melcor Developments displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dream Unlimited and Melcor Developments

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

The idea behind Dream Unlimited Corp and Melcor Developments 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.