Correlation Between 4Mass SA and M Food

Can any of the company-specific risk be diversified away by investing in both 4Mass SA and M Food 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 4Mass SA and M Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 4Mass SA and M Food SA, you can compare the effects of market volatilities on 4Mass SA and M Food 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 4Mass SA with a short position of M Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of 4Mass SA and M Food.

Diversification Opportunities for 4Mass SA and M Food

-0.77

Correlation Coefficient

4Mass SA  M Food

Pay attention - limited upside

The 3 months correlation between 4Mass and MFD is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding 4Mass SA and M Food SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Food SA and 4Mass SA 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 4Mass SA are associated (or correlated) with M Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Food SA has no effect on the direction of 4Mass SA i.e., 4Mass SA and M Food go up and down completely randomly.

Pair Corralation between 4Mass SA and M Food

Assuming the 90 days trading horizon 4Mass SA is expected to generate 2534.25 times less return on investment than M Food. But when comparing it to its historical volatility, 4Mass SA is 3.86 times less risky than M Food. It trades about 0.0 of its potential returns per unit of risk. M Food SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  79.00  in M Food SA on December 29, 2024 and sell it today you would earn a total of  41.00  from holding M Food SA or generate 51.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.13%
Values	Daily Returns

4Mass SA  vs.  M Food SA

4Mass SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days 4Mass SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, 4Mass SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

M Food SA

Risk-Adjusted Performance

Good

Over the last 90 days M Food SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, M Food reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 4Mass SA and M Food

The main advantage of trading using opposite 4Mass SA and M Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 4Mass SA position performs unexpectedly, M Food 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 M Food will offset losses from the drop in M Food's long position.

The idea behind 4Mass SA and M Food SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.