Correlation Between Lalin Property and MFC Asset

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

By analyzing existing cross correlation between Lalin Property Public and MFC Asset Management, you can compare the effects of market volatilities on Lalin Property and MFC Asset 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 Lalin Property with a short position of MFC Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lalin Property and MFC Asset.

Diversification Opportunities for Lalin Property and MFC Asset

0.51

Correlation Coefficient

Lalin Property  MFC Asset

Very weak diversification

The 3 months correlation between Lalin and MFC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lalin Property Public and MFC Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFC Asset Management and Lalin Property 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 Lalin Property Public are associated (or correlated) with MFC Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFC Asset Management has no effect on the direction of Lalin Property i.e., Lalin Property and MFC Asset go up and down completely randomly.

Pair Corralation between Lalin Property and MFC Asset

Assuming the 90 days trading horizon Lalin Property Public is expected to under-perform the MFC Asset. But the stock apears to be less risky and, when comparing its historical volatility, Lalin Property Public is 1.9 times less risky than MFC Asset. The stock trades about -0.15 of its potential returns per unit of risk. The MFC Asset Management is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,600  in MFC Asset Management on December 20, 2024 and sell it today you would lose (75.00) from holding MFC Asset Management or give up 2.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Lalin Property Public  vs.  MFC Asset Management

Lalin Property Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lalin Property Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

MFC Asset Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days MFC Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, MFC Asset is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lalin Property and MFC Asset

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

The idea behind Lalin Property Public and MFC Asset Management 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.