Correlation Between MFF Capital and Zip Co
Can any of the company-specific risk be diversified away by investing in both MFF Capital and Zip Co 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 Zip Co 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 Zip Co Limited, you can compare the effects of market volatilities on MFF Capital and Zip Co 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 Zip Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFF Capital and Zip Co.
Diversification Opportunities for MFF Capital and Zip Co
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MFF and Zip is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Zip Co Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zip Co Limited 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 Zip Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zip Co Limited has no effect on the direction of MFF Capital i.e., MFF Capital and Zip Co go up and down completely randomly.
Pair Corralation between MFF Capital and Zip Co
Assuming the 90 days trading horizon MFF Capital is expected to generate 5.34 times less return on investment than Zip Co. But when comparing it to its historical volatility, MFF Capital Investments is 3.58 times less risky than Zip Co. It trades about 0.14 of its potential returns per unit of risk. Zip Co Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 120.00 in Zip Co Limited on September 5, 2024 and sell it today you would earn a total of 221.00 from holding Zip Co Limited or generate 184.17% 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. Zip Co Limited
Performance |
| Timeline |
| MFF Capital Investments |
| Zip Co Limited |
MFF Capital and Zip Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFF Capital and Zip Co
The main advantage of trading using opposite MFF Capital and Zip Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFF Capital position performs unexpectedly, Zip Co 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 Zip Co will offset losses from the drop in Zip Co's long position.| MFF Capital vs. Australian Foundation Investment | MFF Capital vs. GQG Partners DRC | MFF Capital vs. Metrics Master Income | MFF Capital vs. L1 Long Short |
| Zip Co vs. Qbe Insurance Group | Zip Co vs. Home Consortium | Zip Co vs. Air New Zealand | Zip Co vs. Wt Financial 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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