Correlation Between MBank SA and Enter Air

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

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

Diversification Opportunities for MBank SA and Enter Air

0.38

Correlation Coefficient

MBank SA  Enter Air

Weak diversification

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

Pair Corralation between MBank SA and Enter Air

Assuming the 90 days trading horizon mBank SA is expected to generate 1.47 times more return on investment than Enter Air. However, MBank SA is 1.47 times more volatile than Enter Air SA. It trades about 0.36 of its potential returns per unit of risk. Enter Air SA is currently generating about 0.2 per unit of risk. If you would invest  62,600  in mBank SA on December 3, 2024 and sell it today you would earn a total of  11,780  from holding mBank SA or generate 18.82% return on investment over 90 days.

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

mBank SA  vs.  Enter Air SA

mBank SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in mBank SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MBank SA reported solid returns over the last few months and may actually be approaching a breakup point.

Enter Air SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enter Air SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Enter Air 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 Enter Air

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

The idea behind mBank SA and Enter Air 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.