Correlation Between Industria and Mr Price

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

By analyzing existing cross correlation between Industria de Diseo and Mr Price Group, you can compare the effects of market volatilities on Industria and Mr Price 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 Industria with a short position of Mr Price. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industria and Mr Price.

Diversification Opportunities for Industria and Mr Price

-0.28

Correlation Coefficient

Industria  Mr Price

Very good diversification

The 3 months correlation between Industria and MRPLY is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseo and Mr Price Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Price Group and Industria 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 Industria de Diseo are associated (or correlated) with Mr Price. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Price Group has no effect on the direction of Industria i.e., Industria and Mr Price go up and down completely randomly.

Pair Corralation between Industria and Mr Price

Assuming the 90 days horizon Industria de Diseo is expected to under-perform the Mr Price. In addition to that, Industria is 1.31 times more volatile than Mr Price Group. It trades about -0.02 of its total potential returns per unit of risk. Mr Price Group is currently generating about -0.02 per unit of volatility. If you would invest  1,519  in Mr Price Group on October 24, 2024 and sell it today you would lose (87.00) from holding Mr Price Group or give up 5.73% of portfolio value over 90 days.

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

Industria de Diseo  vs.  Mr Price Group

Industria de Diseo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industria de Diseo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Mr Price Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Price Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Mr Price is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industria and Mr Price

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

The idea behind Industria de Diseo and Mr Price Group 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.