Correlation Between Carlson Investments and MWIG40

Can any of the company-specific risk be diversified away by investing in both Carlson Investments and MWIG40 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 Carlson Investments and MWIG40 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carlson Investments SA and MWIG40, you can compare the effects of market volatilities on Carlson Investments and MWIG40 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 Carlson Investments with a short position of MWIG40. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlson Investments and MWIG40.

Diversification Opportunities for Carlson Investments and MWIG40

0.24

Correlation Coefficient

Carlson Investments  MWIG40

Modest diversification

The 3 months correlation between Carlson and MWIG40 is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Carlson Investments SA and MWIG40 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MWIG40 and Carlson Investments 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 Carlson Investments SA are associated (or correlated) with MWIG40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MWIG40 has no effect on the direction of Carlson Investments i.e., Carlson Investments and MWIG40 go up and down completely randomly.

Pair Corralation between Carlson Investments and MWIG40

Assuming the 90 days trading horizon Carlson Investments is expected to generate 1.53 times less return on investment than MWIG40. In addition to that, Carlson Investments is 7.98 times more volatile than MWIG40. It trades about 0.02 of its total potential returns per unit of risk. MWIG40 is currently generating about 0.2 per unit of volatility. If you would invest  615,165  in MWIG40 on December 2, 2024 and sell it today you would earn a total of  66,928  from holding MWIG40 or generate 10.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Carlson Investments SA  vs.  MWIG40

Pair Trading with Carlson Investments and MWIG40

The main advantage of trading using opposite Carlson Investments and MWIG40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlson Investments position performs unexpectedly, MWIG40 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 MWIG40 will offset losses from the drop in MWIG40's long position.

The idea behind Carlson Investments SA and MWIG40 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.