Correlation Between Enter Air and MBank SA

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

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

Diversification Opportunities for Enter Air and MBank SA

0.38

Correlation Coefficient

Enter Air  MBank SA

Weak diversification

The 3 months correlation between Enter and MBank is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Enter Air SA and mBank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on mBank SA and Enter Air 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 Enter Air 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 Enter Air i.e., Enter Air and MBank SA go up and down completely randomly.

Pair Corralation between Enter Air and MBank SA

Assuming the 90 days trading horizon Enter Air SA is expected to under-perform the MBank SA. But the stock apears to be less risky and, when comparing its historical volatility, Enter Air SA is 1.35 times less risky than MBank SA. The stock trades about -0.02 of its potential returns per unit of risk. The mBank SA is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  54,000  in mBank SA on December 3, 2024 and sell it today you would earn a total of  20,020  from holding mBank SA or generate 37.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Enter Air SA  vs.  mBank SA

Enter Air SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enter Air SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Enter Air 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in mBank SA are ranked lower than 21 (%) 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 Enter Air and MBank SA

The main advantage of trading using opposite Enter Air and MBank SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enter Air 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 Enter Air 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.