Correlation Between Distoken Acquisition and MFA Financial

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

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

Diversification Opportunities for Distoken Acquisition and MFA Financial

0.02

Correlation Coefficient

Distoken Acquisition  MFA Financial

Significant diversification

The 3 months correlation between Distoken and MFA is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Distoken Acquisition and MFA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFA Financial and Distoken Acquisition 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 Distoken Acquisition are associated (or correlated) with MFA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFA Financial has no effect on the direction of Distoken Acquisition i.e., Distoken Acquisition and MFA Financial go up and down completely randomly.

Pair Corralation between Distoken Acquisition and MFA Financial

Given the investment horizon of 90 days Distoken Acquisition is expected to under-perform the MFA Financial. But the stock apears to be less risky and, when comparing its historical volatility, Distoken Acquisition is 1.25 times less risky than MFA Financial. The stock trades about -0.01 of its potential returns per unit of risk. The MFA Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  987.00  in MFA Financial on December 28, 2024 and sell it today you would earn a total of  87.00  from holding MFA Financial or generate 8.81% return on investment over 90 days.

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

Distoken Acquisition  vs.  MFA Financial

Distoken Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Distoken Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Distoken Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

MFA Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MFA Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, MFA Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Distoken Acquisition and MFA Financial

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

The idea behind Distoken Acquisition and MFA Financial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..