Correlation Between M Food and MW Trade
Can any of the company-specific risk be diversified away by investing in both M Food and MW Trade 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 M Food and MW Trade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M Food SA and MW Trade SA, you can compare the effects of market volatilities on M Food and MW Trade 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 M Food with a short position of MW Trade. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Food and MW Trade.
Diversification Opportunities for M Food and MW Trade
Very weak diversification
The 3 months correlation between MFD and MWT is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding M Food SA and MW Trade SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MW Trade SA and M Food 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 M Food SA are associated (or correlated) with MW Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MW Trade SA has no effect on the direction of M Food i.e., M Food and MW Trade go up and down completely randomly.
Pair Corralation between M Food and MW Trade
Assuming the 90 days trading horizon M Food SA is expected to under-perform the MW Trade. But the stock apears to be less risky and, when comparing its historical volatility, M Food SA is 1.58 times less risky than MW Trade. The stock trades about -0.01 of its potential returns per unit of risk. The MW Trade SA is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 310.00 in MW Trade SA on October 25, 2024 and sell it today you would earn a total of 48.00 from holding MW Trade SA or generate 15.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
M Food SA vs. MW Trade SA
Performance |
| Timeline |
| M Food SA |
| MW Trade SA |
M Food and MW Trade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M Food and MW Trade
The main advantage of trading using opposite M Food and MW Trade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Food position performs unexpectedly, MW Trade 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 MW Trade will offset losses from the drop in MW Trade's long position.| M Food vs. Saule Technologies SA | M Food vs. Investment Friends Capital | M Food vs. LSI Software SA | M Food vs. Drago entertainment SA |
| MW Trade vs. M Food SA | MW Trade vs. Echo Investment SA | MW Trade vs. Skyline Investment SA | MW Trade vs. PMPG Polskie Media |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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