Correlation Between 4Mass SA and MW Trade

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

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

Diversification Opportunities for 4Mass SA and MW Trade

0.34

Correlation Coefficient

4Mass SA  MW Trade

Weak diversification

The 3 months correlation between 4Mass and MWT is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding 4Mass SA and MW Trade SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MW Trade 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 MW Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MW Trade SA has no effect on the direction of 4Mass SA i.e., 4Mass SA and MW Trade go up and down completely randomly.

Pair Corralation between 4Mass SA and MW Trade

Assuming the 90 days trading horizon 4Mass SA is expected to generate 1.95 times less return on investment than MW Trade. But when comparing it to its historical volatility, 4Mass SA is 2.88 times less risky than MW Trade. It trades about 0.45 of its potential returns per unit of risk. MW Trade SA is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  310.00  in MW Trade SA on October 26, 2024 and sell it today you would earn a total of  82.00  from holding MW Trade SA or generate 26.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

4Mass SA  vs.  MW Trade SA

4Mass SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 4Mass SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

MW Trade SA

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MW Trade SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, MW Trade is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with 4Mass SA and MW Trade

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

The idea behind 4Mass SA and MW Trade 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.