Correlation Between Associated British and Marwyn Value

Can any of the company-specific risk be diversified away by investing in both Associated British and Marwyn Value 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 Associated British and Marwyn Value into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Associated British Foods and Marwyn Value Investors, you can compare the effects of market volatilities on Associated British and Marwyn Value 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 Associated British with a short position of Marwyn Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Marwyn Value.

Diversification Opportunities for Associated British and Marwyn Value

0.24

Correlation Coefficient

Associated British  Marwyn Value

Modest diversification

The 3 months correlation between Associated and Marwyn is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Marwyn Value Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marwyn Value Investors and Associated British 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 Associated British Foods are associated (or correlated) with Marwyn Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marwyn Value Investors has no effect on the direction of Associated British i.e., Associated British and Marwyn Value go up and down completely randomly.

Pair Corralation between Associated British and Marwyn Value

Assuming the 90 days trading horizon Associated British Foods is expected to generate 2.53 times more return on investment than Marwyn Value. However, Associated British is 2.53 times more volatile than Marwyn Value Investors. It trades about -0.02 of its potential returns per unit of risk. Marwyn Value Investors is currently generating about -0.41 per unit of risk. If you would invest  228,900  in Associated British Foods on September 4, 2024 and sell it today you would lose (1,700) from holding Associated British Foods or give up 0.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Associated British Foods  vs.  Marwyn Value Investors

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Marwyn Value Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marwyn Value Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Marwyn Value is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Associated British and Marwyn Value

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

The idea behind Associated British Foods and Marwyn Value Investors 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.