Correlation Between MBank SA and ED Invest

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

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

Diversification Opportunities for MBank SA and ED Invest

-0.24

Correlation Coefficient

MBank SA  ED Invest

Very good diversification

The 3 months correlation between MBank and EDI is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding mBank SA and ED Invest SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ED Invest SA 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 ED Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ED Invest SA has no effect on the direction of MBank SA i.e., MBank SA and ED Invest go up and down completely randomly.

Pair Corralation between MBank SA and ED Invest

Assuming the 90 days trading horizon mBank SA is expected to under-perform the ED Invest. But the stock apears to be less risky and, when comparing its historical volatility, mBank SA is 1.28 times less risky than ED Invest. The stock trades about -0.1 of its potential returns per unit of risk. The ED Invest SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  555.00  in ED Invest SA on September 13, 2024 and sell it today you would lose (5.00) from holding ED Invest SA or give up 0.9% of portfolio value over 90 days.

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

mBank SA  vs.  ED Invest 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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ED Invest SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ED Invest SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, ED Invest is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MBank SA and ED Invest

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

The idea behind mBank SA and ED Invest 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.