Correlation Between MED PAPER and M2M GROUP

Can any of the company-specific risk be diversified away by investing in both MED PAPER and M2M GROUP 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 MED PAPER and M2M GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MED PAPER and M2M GROUP, you can compare the effects of market volatilities on MED PAPER and M2M GROUP 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 MED PAPER with a short position of M2M GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of MED PAPER and M2M GROUP.

Diversification Opportunities for MED PAPER and M2M GROUP

-0.16

Correlation Coefficient

MED PAPER  M2M GROUP

Good diversification

The 3 months correlation between MED and M2M is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding MED PAPER and M2M GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M2M GROUP and MED PAPER 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 MED PAPER are associated (or correlated) with M2M GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M2M GROUP has no effect on the direction of MED PAPER i.e., MED PAPER and M2M GROUP go up and down completely randomly.

Pair Corralation between MED PAPER and M2M GROUP

Assuming the 90 days trading horizon MED PAPER is expected to under-perform the M2M GROUP. But the stock apears to be less risky and, when comparing its historical volatility, MED PAPER is 1.62 times less risky than M2M GROUP. The stock trades about -0.05 of its potential returns per unit of risk. The M2M GROUP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  54,300  in M2M GROUP on September 5, 2024 and sell it today you would earn a total of  3,900  from holding M2M GROUP or generate 7.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

MED PAPER  vs.  M2M GROUP

MED PAPER

Risk-Adjusted Performance

0 of 100

Very Weak

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

M2M GROUP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in M2M GROUP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, M2M GROUP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MED PAPER and M2M GROUP

The main advantage of trading using opposite MED PAPER and M2M GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MED PAPER position performs unexpectedly, M2M GROUP 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 M2M GROUP will offset losses from the drop in M2M GROUP's long position.

The idea behind MED PAPER and M2M GROUP 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.