Correlation Between Enter Air and M Food

Can any of the company-specific risk be diversified away by investing in both Enter Air and M Food 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 M Food 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 M Food SA, you can compare the effects of market volatilities on Enter Air and M Food 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 M Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enter Air and M Food.

Diversification Opportunities for Enter Air and M Food

0.55

Correlation Coefficient

Enter Air  M Food

Very weak diversification

The 3 months correlation between Enter and MFD is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Enter Air SA and M Food SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Food 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 M Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Food SA has no effect on the direction of Enter Air i.e., Enter Air and M Food go up and down completely randomly.

Pair Corralation between Enter Air and M Food

Assuming the 90 days trading horizon Enter Air is expected to generate 3.22 times less return on investment than M Food. But when comparing it to its historical volatility, Enter Air SA is 4.78 times less risky than M Food. It trades about 0.17 of its potential returns per unit of risk. M Food SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  88.00  in M Food SA on December 20, 2024 and sell it today you would earn a total of  31.00  from holding M Food SA or generate 35.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.83%
Values	Daily Returns

Enter Air SA  vs.  M Food SA

Enter Air SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enter Air SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Enter Air reported solid returns over the last few months and may actually be approaching a breakup point.

M Food SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M Food SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, M Food reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enter Air and M Food

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

The idea behind Enter Air SA and M Food 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.