Correlation Between IT Link and Manitou BF

Can any of the company-specific risk be diversified away by investing in both IT Link and Manitou BF 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 IT Link and Manitou BF into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for IT Link and Manitou BF

-0.75

Correlation Coefficient

IT Link  Manitou BF

Pay attention - limited upside

The 3 months correlation between ALITL and Manitou is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding IT Link and Manitou BF SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manitou BF SA and IT Link 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 IT Link are associated (or correlated) with Manitou BF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manitou BF SA has no effect on the direction of IT Link i.e., IT Link and Manitou BF go up and down completely randomly.

Pair Corralation between IT Link and Manitou BF

Assuming the 90 days trading horizon IT Link is expected to under-perform the Manitou BF. But the stock apears to be less risky and, when comparing its historical volatility, IT Link is 1.27 times less risky than Manitou BF. The stock trades about -0.03 of its potential returns per unit of risk. The Manitou BF SA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,570  in Manitou BF SA on November 29, 2024 and sell it today you would earn a total of  725.00  from holding Manitou BF SA or generate 46.18% return on investment over 90 days.

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

IT Link  vs.  Manitou BF SA

IT Link

Risk-Adjusted Performance

Very Weak

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

Manitou BF SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Manitou BF SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Manitou BF sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IT Link and Manitou BF

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

The idea behind IT Link and Manitou BF 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.