Correlation Between L1 Long and MFF Capital

Can any of the company-specific risk be diversified away by investing in both L1 Long and MFF Capital 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 L1 Long and MFF Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between L1 Long Short and MFF Capital Investments, you can compare the effects of market volatilities on L1 Long and MFF Capital 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 L1 Long with a short position of MFF Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of L1 Long and MFF Capital.

Diversification Opportunities for L1 Long and MFF Capital

0.38

Correlation Coefficient

L1 Long  MFF Capital

Weak diversification

The 3 months correlation between LSF and MFF is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding L1 Long Short and MFF Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFF Capital Investments and L1 Long 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 L1 Long Short are associated (or correlated) with MFF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFF Capital Investments has no effect on the direction of L1 Long i.e., L1 Long and MFF Capital go up and down completely randomly.

Pair Corralation between L1 Long and MFF Capital

Assuming the 90 days trading horizon L1 Long Short is expected to under-perform the MFF Capital. In addition to that, L1 Long is 1.36 times more volatile than MFF Capital Investments. It trades about -0.01 of its total potential returns per unit of risk. MFF Capital Investments is currently generating about 0.22 per unit of volatility. If you would invest  375.00  in MFF Capital Investments on August 30, 2024 and sell it today you would earn a total of  57.00  from holding MFF Capital Investments or generate 15.2% return on investment over 90 days.

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

L1 Long Short  vs.  MFF Capital Investments

L1 Long Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L1 Long Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, L1 Long is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

MFF Capital Investments

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MFF Capital Investments are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MFF Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with L1 Long and MFF Capital

The main advantage of trading using opposite L1 Long and MFF Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L1 Long position performs unexpectedly, MFF Capital 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 MFF Capital will offset losses from the drop in MFF Capital's long position.

The idea behind L1 Long Short and MFF Capital Investments 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.