Correlation Between MCI Management and Inter Cars

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

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

Diversification Opportunities for MCI Management and Inter Cars

-0.16

Correlation Coefficient

MCI Management  Inter Cars

Good diversification

The 3 months correlation between MCI and Inter is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding MCI Management SA and Inter Cars SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Cars SA and MCI Management 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 MCI Management SA are associated (or correlated) with Inter Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Cars SA has no effect on the direction of MCI Management i.e., MCI Management and Inter Cars go up and down completely randomly.

Pair Corralation between MCI Management and Inter Cars

Assuming the 90 days trading horizon MCI Management SA is expected to under-perform the Inter Cars. But the stock apears to be less risky and, when comparing its historical volatility, MCI Management SA is 2.26 times less risky than Inter Cars. The stock trades about -0.21 of its potential returns per unit of risk. The Inter Cars SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  51,500  in Inter Cars SA on October 11, 2024 and sell it today you would earn a total of  2,600  from holding Inter Cars SA or generate 5.05% return on investment over 90 days.

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

MCI Management SA  vs.  Inter Cars SA

MCI Management SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCI Management 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.

Inter Cars SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Cars SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Inter Cars may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MCI Management and Inter Cars

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

The idea behind MCI Management SA and Inter Cars 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.