Correlation Between MBank SA and Biztech Konsulting

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

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

Diversification Opportunities for MBank SA and Biztech Konsulting

-0.55

Correlation Coefficient

MBank SA  Biztech Konsulting

Excellent diversification

The 3 months correlation between MBank and Biztech is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding mBank SA and Biztech Konsulting SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biztech Konsulting and MBank SA 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 mBank SA are associated (or correlated) with Biztech Konsulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biztech Konsulting has no effect on the direction of MBank SA i.e., MBank SA and Biztech Konsulting go up and down completely randomly.

Pair Corralation between MBank SA and Biztech Konsulting

Assuming the 90 days trading horizon mBank SA is expected to under-perform the Biztech Konsulting. But the stock apears to be less risky and, when comparing its historical volatility, mBank SA is 2.82 times less risky than Biztech Konsulting. The stock trades about -0.06 of its potential returns per unit of risk. The Biztech Konsulting SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Biztech Konsulting SA on October 12, 2024 and sell it today you would earn a total of  4.00  from holding Biztech Konsulting SA or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

mBank SA  vs.  Biztech Konsulting SA

mBank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days mBank SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Biztech Konsulting

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biztech Konsulting SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Biztech Konsulting reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MBank SA and Biztech Konsulting

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

The idea behind mBank SA and Biztech Konsulting 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.

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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.