Correlation Between CFI Holding and Mlk Foods

Can any of the company-specific risk be diversified away by investing in both CFI Holding and Mlk Foods 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 Mlk Foods 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 Mlk Foods Public, you can compare the effects of market volatilities on CFI Holding and Mlk Foods 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 Mlk Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of CFI Holding and Mlk Foods.

Diversification Opportunities for CFI Holding and Mlk Foods

-0.18

Correlation Coefficient

CFI Holding  Mlk Foods

Good diversification

The 3 months correlation between CFI and Mlk is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding CFI Holding SA and Mlk Foods Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mlk Foods Public 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 Mlk Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mlk Foods Public has no effect on the direction of CFI Holding i.e., CFI Holding and Mlk Foods go up and down completely randomly.

Pair Corralation between CFI Holding and Mlk Foods

Assuming the 90 days trading horizon CFI Holding is expected to generate 21.4 times less return on investment than Mlk Foods. But when comparing it to its historical volatility, CFI Holding SA is 1.94 times less risky than Mlk Foods. It trades about 0.02 of its potential returns per unit of risk. Mlk Foods Public is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  110.00  in Mlk Foods Public on December 2, 2024 and sell it today you would earn a total of  201.00  from holding Mlk Foods Public or generate 182.73% return on investment over 90 days.

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

CFI Holding SA  vs.  Mlk Foods Public

CFI Holding SA

Risk-Adjusted Performance

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 current stock price agitation, may contribute to short-term losses for the retail investors.

Mlk Foods Public

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mlk Foods Public are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Mlk Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CFI Holding and Mlk Foods

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

The idea behind CFI Holding SA and Mlk Foods Public 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 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.