Correlation Between MBank SA and Dom Development
Can any of the company-specific risk be diversified away by investing in both MBank SA and Dom Development 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 MBank SA and Dom Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between mBank SA and Dom Development SA, you can compare the effects of market volatilities on MBank SA and Dom Development 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 MBank SA with a short position of Dom Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of MBank SA and Dom Development.
Diversification Opportunities for MBank SA and Dom Development
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MBank and Dom is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding mBank SA and Dom Development SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dom Development SA and MBank SA 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 mBank SA are associated (or correlated) with Dom Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dom Development SA has no effect on the direction of MBank SA i.e., MBank SA and Dom Development go up and down completely randomly.
Pair Corralation between MBank SA and Dom Development
Assuming the 90 days trading horizon mBank SA is expected to under-perform the Dom Development. In addition to that, MBank SA is 1.16 times more volatile than Dom Development SA. It trades about -0.09 of its total potential returns per unit of risk. Dom Development SA is currently generating about 0.05 per unit of volatility. If you would invest 19,300 in Dom Development SA on August 28, 2024 and sell it today you would earn a total of 320.00 from holding Dom Development SA or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
mBank SA vs. Dom Development SA
Performance |
| Timeline |
| mBank SA |
| Dom Development SA |
MBank SA and Dom Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MBank SA and Dom Development
The main advantage of trading using opposite MBank SA and Dom Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MBank SA position performs unexpectedly, Dom Development 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 Dom Development will offset losses from the drop in Dom Development's long position.The idea behind mBank SA and Dom Development SA 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.| Dom Development vs. PZ Cormay SA | Dom Development vs. Enter Air SA | Dom Development vs. 3R Games SA | Dom Development vs. Gaming Factory SA |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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