Correlation Between Mauna Kea and Broadpeak

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

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

Diversification Opportunities for Mauna Kea and Broadpeak

-0.33

Correlation Coefficient

Mauna Kea  Broadpeak

Very good diversification

The 3 months correlation between Mauna and Broadpeak is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Mauna Kea Technologies and Broadpeak SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadpeak SA and Mauna Kea 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 Mauna Kea Technologies are associated (or correlated) with Broadpeak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadpeak SA has no effect on the direction of Mauna Kea i.e., Mauna Kea and Broadpeak go up and down completely randomly.

Pair Corralation between Mauna Kea and Broadpeak

Assuming the 90 days trading horizon Mauna Kea is expected to generate 2.35 times less return on investment than Broadpeak. But when comparing it to its historical volatility, Mauna Kea Technologies is 1.15 times less risky than Broadpeak. It trades about 0.05 of its potential returns per unit of risk. Broadpeak SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  98.00  in Broadpeak SA on December 25, 2024 and sell it today you would earn a total of  19.00  from holding Broadpeak SA or generate 19.39% return on investment over 90 days.

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

Mauna Kea Technologies  vs.  Broadpeak SA

Mauna Kea Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mauna Kea Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Mauna Kea may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Broadpeak SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadpeak SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Broadpeak reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mauna Kea and Broadpeak

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

The idea behind Mauna Kea Technologies and Broadpeak 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.