Correlation Between MFF Capital and Vulcan Energy
Can any of the company-specific risk be diversified away by investing in both MFF Capital and Vulcan Energy 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 Vulcan Energy 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 Vulcan Energy Resources, you can compare the effects of market volatilities on MFF Capital and Vulcan Energy 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 Vulcan Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFF Capital and Vulcan Energy.
Diversification Opportunities for MFF Capital and Vulcan Energy
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MFF and Vulcan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Vulcan Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan 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 Vulcan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Energy Resources has no effect on the direction of MFF Capital i.e., MFF Capital and Vulcan Energy go up and down completely randomly.
Pair Corralation between MFF Capital and Vulcan Energy
Assuming the 90 days trading horizon MFF Capital Investments is expected to generate 0.35 times more return on investment than Vulcan Energy. However, MFF Capital Investments is 2.87 times less risky than Vulcan Energy. It trades about 0.17 of its potential returns per unit of risk. Vulcan Energy Resources is currently generating about -0.16 per unit of risk. If you would invest 446.00 in MFF Capital Investments on October 12, 2024 and sell it today you would earn a total of 20.00 from holding MFF Capital Investments or generate 4.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
MFF Capital Investments vs. Vulcan Energy Resources
Performance |
| Timeline |
| MFF Capital Investments |
| Vulcan Energy Resources |
MFF Capital and Vulcan Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFF Capital and Vulcan Energy
The main advantage of trading using opposite MFF Capital and Vulcan Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFF Capital position performs unexpectedly, Vulcan Energy 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 Vulcan Energy will offset losses from the drop in Vulcan Energy's long position.| MFF Capital vs. Bluescope Steel | MFF Capital vs. Stelar Metals | MFF Capital vs. Sky Metals | MFF Capital vs. Falcon Metals |
| Vulcan Energy vs. BKI Investment | Vulcan Energy vs. MFF Capital Investments | Vulcan Energy vs. Alternative Investment Trust | Vulcan Energy vs. Pinnacle Investment 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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