Correlation Between Djerriwarrh Investments and MFF Capital

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

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

Diversification Opportunities for Djerriwarrh Investments and MFF Capital

0.02

Correlation Coefficient

Djerriwarrh Investments  MFF Capital

Significant diversification

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

Pair Corralation between Djerriwarrh Investments and MFF Capital

Assuming the 90 days trading horizon Djerriwarrh Investments is expected to under-perform the MFF Capital. But the stock apears to be less risky and, when comparing its historical volatility, Djerriwarrh Investments is 1.44 times less risky than MFF Capital. The stock trades about -0.02 of its potential returns per unit of risk. The MFF Capital Investments is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  389.00  in MFF Capital Investments on October 22, 2024 and sell it today you would earn a total of  86.00  from holding MFF Capital Investments or generate 22.11% return on investment over 90 days.

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

Djerriwarrh Investments  vs.  MFF Capital Investments

Djerriwarrh Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

MFF Capital Investments

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MFF Capital Investments are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MFF Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Djerriwarrh Investments and MFF Capital

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

The idea behind Djerriwarrh Investments and MFF Capital Investments 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.