Correlation Between CFI Holding and MBank SA

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

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

Diversification Opportunities for CFI Holding and MBank SA

-0.67

Correlation Coefficient

CFI Holding  MBank SA

Excellent diversification

The 3 months correlation between CFI and MBank is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding CFI Holding SA and mBank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on mBank SA and CFI Holding 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 CFI Holding SA are associated (or correlated) with MBank SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of mBank SA has no effect on the direction of CFI Holding i.e., CFI Holding and MBank SA go up and down completely randomly.

Pair Corralation between CFI Holding and MBank SA

Assuming the 90 days trading horizon CFI Holding SA is expected to under-perform the MBank SA. In addition to that, CFI Holding is 2.08 times more volatile than mBank SA. It trades about 0.0 of its total potential returns per unit of risk. mBank SA is currently generating about 0.34 per unit of volatility. If you would invest  54,720  in mBank SA on December 29, 2024 and sell it today you would earn a total of  28,820  from holding mBank SA or generate 52.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

CFI Holding SA  vs.  mBank SA

CFI Holding SA

Risk-Adjusted Performance

Very Weak

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

mBank SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in mBank SA are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MBank SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CFI Holding and MBank SA

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

The idea behind CFI Holding SA and mBank 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.