Correlation Between Foodlink and Mytilineos

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

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

Diversification Opportunities for Foodlink and Mytilineos

0.25

Correlation Coefficient

Foodlink  Mytilineos

Modest diversification

The 3 months correlation between Foodlink and Mytilineos is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Foodlink AE and Mytilineos SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mytilineos SA and Foodlink 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 Foodlink AE are associated (or correlated) with Mytilineos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mytilineos SA has no effect on the direction of Foodlink i.e., Foodlink and Mytilineos go up and down completely randomly.

Pair Corralation between Foodlink and Mytilineos

Assuming the 90 days trading horizon Foodlink AE is expected to generate 1.7 times more return on investment than Mytilineos. However, Foodlink is 1.7 times more volatile than Mytilineos SA. It trades about 0.15 of its potential returns per unit of risk. Mytilineos SA is currently generating about 0.06 per unit of risk. If you would invest  35.00  in Foodlink AE on October 10, 2024 and sell it today you would earn a total of  8.00  from holding Foodlink AE or generate 22.86% return on investment over 90 days.

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

Foodlink AE  vs.  Mytilineos SA

Foodlink AE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Foodlink AE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Foodlink sustained solid returns over the last few months and may actually be approaching a breakup point.

Mytilineos SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mytilineos SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mytilineos is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Foodlink and Mytilineos

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

The idea behind Foodlink AE and Mytilineos 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.