Correlation Between MBank SA and Text SA
Can any of the company-specific risk be diversified away by investing in both MBank SA and Text SA 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 Text SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between mBank SA and Text SA, you can compare the effects of market volatilities on MBank SA and Text SA 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 Text SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MBank SA and Text SA.
Diversification Opportunities for MBank SA and Text SA
Poor diversification
The 3 months correlation between MBank and Text is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding mBank SA and Text SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Text 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 Text SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Text SA has no effect on the direction of MBank SA i.e., MBank SA and Text SA go up and down completely randomly.
Pair Corralation between MBank SA and Text SA
Assuming the 90 days trading horizon mBank SA is expected to generate 0.73 times more return on investment than Text SA. However, mBank SA is 1.37 times less risky than Text SA. It trades about -0.06 of its potential returns per unit of risk. Text SA is currently generating about -0.05 per unit of risk. If you would invest 63,600 in mBank SA on September 1, 2024 and sell it today you would lose (10,600) from holding mBank SA or give up 16.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.22% |
| Values | Daily Returns |
mBank SA vs. Text SA
Performance |
| Timeline |
| mBank SA |
| Text SA |
MBank SA and Text SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MBank SA and Text SA
The main advantage of trading using opposite MBank SA and Text SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MBank SA position performs unexpectedly, Text SA 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 Text SA will offset losses from the drop in Text SA's long position.| MBank SA vs. Ultimate Games SA | MBank SA vs. New Tech Venture | MBank SA vs. 3R Games SA | MBank SA vs. Biztech Konsulting SA |
| Text SA vs. Banco Santander SA | Text SA vs. UniCredit SpA | Text SA vs. CEZ as | Text SA vs. Polski Koncern Naftowy |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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