Correlation Between MBank SA and PCF Group
Can any of the company-specific risk be diversified away by investing in both MBank SA and PCF Group 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 PCF Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between mBank SA and PCF Group SA, you can compare the effects of market volatilities on MBank SA and PCF Group 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 PCF Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of MBank SA and PCF Group.
Diversification Opportunities for MBank SA and PCF Group
Very poor diversification
The 3 months correlation between MBank and PCF is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding mBank SA and PCF Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCF Group 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 PCF Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCF Group SA has no effect on the direction of MBank SA i.e., MBank SA and PCF Group go up and down completely randomly.
Pair Corralation between MBank SA and PCF Group
Assuming the 90 days trading horizon mBank SA is expected to generate 0.73 times more return on investment than PCF Group. However, mBank SA is 1.37 times less risky than PCF Group. It trades about -0.11 of its potential returns per unit of risk. PCF Group SA is currently generating about -0.29 per unit of risk. If you would invest 57,680 in mBank SA on August 28, 2024 and sell it today you would lose (3,400) from holding mBank SA or give up 5.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
mBank SA vs. PCF Group SA
Performance |
| Timeline |
| mBank SA |
| PCF Group SA |
MBank SA and PCF Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MBank SA and PCF Group
The main advantage of trading using opposite MBank SA and PCF Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MBank SA position performs unexpectedly, PCF Group 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 PCF Group will offset losses from the drop in PCF Group's long position.The idea behind mBank SA and PCF Group 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.| PCF Group vs. PLAYWAY SA | PCF Group vs. Movie Games SA | PCF Group vs. Santander Bank Polska | PCF Group vs. Bank Millennium 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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