Correlation Between Alternative Investment and MFF Capital

Can any of the company-specific risk be diversified away by investing in both Alternative Investment and MFF Capital 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 Alternative Investment and MFF Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alternative Investment Trust and MFF Capital Investments, you can compare the effects of market volatilities on Alternative Investment and MFF Capital 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 Alternative Investment with a short position of MFF Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternative Investment and MFF Capital.

Diversification Opportunities for Alternative Investment and MFF Capital

0.58

Correlation Coefficient

Alternative Investment  MFF Capital

Very weak diversification

The 3 months correlation between Alternative and MFF is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Investment Trust and MFF Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFF Capital Investments and Alternative Investment 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 Alternative Investment Trust are associated (or correlated) with MFF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFF Capital Investments has no effect on the direction of Alternative Investment i.e., Alternative Investment and MFF Capital go up and down completely randomly.

Pair Corralation between Alternative Investment and MFF Capital

Assuming the 90 days trading horizon Alternative Investment Trust is expected to generate 1.44 times more return on investment than MFF Capital. However, Alternative Investment is 1.44 times more volatile than MFF Capital Investments. It trades about 0.16 of its potential returns per unit of risk. MFF Capital Investments is currently generating about 0.2 per unit of risk. If you would invest  125.00  in Alternative Investment Trust on August 31, 2024 and sell it today you would earn a total of  19.00  from holding Alternative Investment Trust or generate 15.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Alternative Investment Trust  vs.  MFF Capital Investments

Alternative Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alternative Investment Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alternative Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

MFF Capital Investments

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MFF Capital Investments are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MFF Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alternative Investment and MFF Capital

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

The idea behind Alternative Investment Trust and MFF Capital Investments 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.