Correlation Between Inter Cars and MCI Management

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

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

Diversification Opportunities for Inter Cars and MCI Management

-0.16

Correlation Coefficient

Inter Cars  MCI Management

Good diversification

The 3 months correlation between Inter and MCI is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Inter Cars SA and MCI Management SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCI Management SA and Inter Cars 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 Inter Cars SA are associated (or correlated) with MCI Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCI Management SA has no effect on the direction of Inter Cars i.e., Inter Cars and MCI Management go up and down completely randomly.

Pair Corralation between Inter Cars and MCI Management

Assuming the 90 days trading horizon Inter Cars SA is expected to generate 1.71 times more return on investment than MCI Management. However, Inter Cars is 1.71 times more volatile than MCI Management SA. It trades about 0.06 of its potential returns per unit of risk. MCI Management SA is currently generating about -0.13 per unit of risk. If you would invest  51,100  in Inter Cars SA on October 11, 2024 and sell it today you would earn a total of  3,000  from holding Inter Cars SA or generate 5.87% return on investment over 90 days.

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

Inter Cars SA  vs.  MCI Management SA

Inter Cars SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Cars SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Inter Cars may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MCI Management SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCI Management SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Inter Cars and MCI Management

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

The idea behind Inter Cars SA and MCI Management 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.