Correlation Between MFF Capital and Indiana Resources
Can any of the company-specific risk be diversified away by investing in both MFF Capital and Indiana 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 Indiana 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 Indiana Resources, you can compare the effects of market volatilities on MFF Capital and Indiana 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 Indiana Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFF Capital and Indiana Resources.
Diversification Opportunities for MFF Capital and Indiana Resources
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MFF and Indiana is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Indiana Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indiana 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 Indiana Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indiana Resources has no effect on the direction of MFF Capital i.e., MFF Capital and Indiana Resources go up and down completely randomly.
Pair Corralation between MFF Capital and Indiana Resources
Assuming the 90 days trading horizon MFF Capital is expected to generate 2.07 times less return on investment than Indiana Resources. But when comparing it to its historical volatility, MFF Capital Investments is 1.68 times less risky than Indiana Resources. It trades about 0.18 of its potential returns per unit of risk. Indiana Resources is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 6.10 in Indiana Resources on October 22, 2024 and sell it today you would earn a total of 0.30 from holding Indiana Resources or generate 4.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFF Capital Investments vs. Indiana Resources
Performance |
| Timeline |
| MFF Capital Investments |
| Indiana Resources |
MFF Capital and Indiana Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFF Capital and Indiana Resources
The main advantage of trading using opposite MFF Capital and Indiana Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFF Capital position performs unexpectedly, Indiana 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 Indiana Resources will offset losses from the drop in Indiana Resources' long position.| MFF Capital vs. Aneka Tambang Tbk | MFF Capital vs. Commonwealth Bank | MFF Capital vs. Commonwealth Bank of | MFF Capital vs. Australia and New |
| Indiana Resources vs. Firstwave Cloud Technology | Indiana Resources vs. Ainsworth Game Technology | Indiana Resources vs. Computershare | Indiana Resources vs. Platinum Asset Management |
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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