Correlation Between Dexus Convenience and MFF Capital

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

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

Diversification Opportunities for Dexus Convenience and MFF Capital

0.26

Correlation Coefficient

Dexus Convenience  MFF Capital

Modest diversification

The 3 months correlation between Dexus and MFF is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dexus Convenience Retail 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 Dexus Convenience 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 Dexus Convenience Retail 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 Dexus Convenience i.e., Dexus Convenience and MFF Capital go up and down completely randomly.

Pair Corralation between Dexus Convenience and MFF Capital

Assuming the 90 days trading horizon Dexus Convenience Retail is expected to generate 1.16 times more return on investment than MFF Capital. However, Dexus Convenience is 1.16 times more volatile than MFF Capital Investments. It trades about 0.01 of its potential returns per unit of risk. MFF Capital Investments is currently generating about -0.12 per unit of risk. If you would invest  292.00  in Dexus Convenience Retail on December 28, 2024 and sell it today you would earn a total of  1.00  from holding Dexus Convenience Retail or generate 0.34% return on investment over 90 days.

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

Dexus Convenience Retail  vs.  MFF Capital Investments

Dexus Convenience Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dexus Convenience Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Dexus Convenience 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

Very Weak

Over the last 90 days MFF Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Dexus Convenience and MFF Capital

The main advantage of trading using opposite Dexus Convenience and MFF Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dexus Convenience 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 Dexus Convenience Retail 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.