Correlation Between MFF Capital and Energy Resources
Can any of the company-specific risk be diversified away by investing in both MFF Capital and Energy Resources 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 MFF Capital and Energy Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFF Capital Investments and Energy Resources, you can compare the effects of market volatilities on MFF Capital and Energy Resources 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 MFF Capital with a short position of Energy Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFF Capital and Energy Resources.
Diversification Opportunities for MFF Capital and Energy Resources
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MFF and Energy is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Resources and MFF Capital 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 MFF Capital Investments are associated (or correlated) with Energy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Resources has no effect on the direction of MFF Capital i.e., MFF Capital and Energy Resources go up and down completely randomly.
Pair Corralation between MFF Capital and Energy Resources
Assuming the 90 days trading horizon MFF Capital is expected to generate 2.24 times less return on investment than Energy Resources. But when comparing it to its historical volatility, MFF Capital Investments is 15.48 times less risky than Energy Resources. It trades about 0.15 of its potential returns per unit of risk. Energy Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Energy Resources on September 5, 2024 and sell it today you would lose (3.70) from holding Energy Resources or give up 92.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
MFF Capital Investments vs. Energy Resources
Performance |
| Timeline |
| MFF Capital Investments |
| Energy Resources |
MFF Capital and Energy Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFF Capital and Energy Resources
The main advantage of trading using opposite MFF Capital and Energy Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFF Capital position performs unexpectedly, Energy Resources 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 Energy Resources will offset losses from the drop in Energy Resources' long position.| MFF Capital vs. GQG Partners DRC | MFF Capital vs. Metrics Master Income | MFF Capital vs. L1 Long Short | MFF Capital vs. Wam Leaders |
| Energy Resources vs. Westpac Banking | Energy Resources vs. ABACUS STORAGE KING | Energy Resources vs. Odyssey Energy | Energy Resources vs. Bisalloy Steel Group |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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