Correlation Between MBank SA and KCI SA

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

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

Diversification Opportunities for MBank SA and KCI SA

-0.41

Correlation Coefficient

MBank SA  KCI SA

Very good diversification

The 3 months correlation between MBank and KCI is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding mBank SA and KCI SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCI 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 KCI SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCI SA has no effect on the direction of MBank SA i.e., MBank SA and KCI SA go up and down completely randomly.

Pair Corralation between MBank SA and KCI SA

Assuming the 90 days trading horizon mBank SA is expected to under-perform the KCI SA. In addition to that, MBank SA is 1.42 times more volatile than KCI SA. It trades about -0.08 of its total potential returns per unit of risk. KCI SA is currently generating about 0.03 per unit of volatility. If you would invest  79.00  in KCI SA on September 12, 2024 and sell it today you would earn a total of  2.00  from holding KCI SA or generate 2.53% return on investment over 90 days.

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

mBank SA  vs.  KCI 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.

KCI SA

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KCI SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, KCI SA 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 KCI SA

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

The idea behind mBank SA and KCI 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.