Correlation Between GMO Internet and MBANK

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

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

Diversification Opportunities for GMO Internet and MBANK

0.79

Correlation Coefficient

GMO Internet  MBANK

Poor diversification

The 3 months correlation between GMO and MBANK is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and MBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBANK and GMO Internet 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 GMO Internet are associated (or correlated) with MBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBANK has no effect on the direction of GMO Internet i.e., GMO Internet and MBANK go up and down completely randomly.

Pair Corralation between GMO Internet and MBANK

Assuming the 90 days horizon GMO Internet is expected to generate 2.08 times less return on investment than MBANK. But when comparing it to its historical volatility, GMO Internet is 1.18 times less risky than MBANK. It trades about 0.18 of its potential returns per unit of risk. MBANK is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  12,240  in MBANK on December 20, 2024 and sell it today you would earn a total of  6,745  from holding MBANK or generate 55.11% return on investment over 90 days.

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

GMO Internet  vs.  MBANK

GMO Internet

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GMO Internet reported solid returns over the last few months and may actually be approaching a breakup point.

MBANK

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MBANK are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, MBANK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMO Internet and MBANK

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

The idea behind GMO Internet and MBANK 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.