Correlation Between M Food and Beta MWIG40TR

Can any of the company-specific risk be diversified away by investing in both M Food and Beta MWIG40TR 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 M Food and Beta MWIG40TR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between M Food SA and Beta mWIG40TR Portfelowy, you can compare the effects of market volatilities on M Food and Beta MWIG40TR 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 M Food with a short position of Beta MWIG40TR. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Food and Beta MWIG40TR.

Diversification Opportunities for M Food and Beta MWIG40TR

-0.02

Correlation Coefficient

M Food  Beta MWIG40TR

Good diversification

The 3 months correlation between MFD and Beta is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding M Food SA and Beta mWIG40TR Portfelowy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beta mWIG40TR Portfelowy and M Food 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 M Food SA are associated (or correlated) with Beta MWIG40TR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beta mWIG40TR Portfelowy has no effect on the direction of M Food i.e., M Food and Beta MWIG40TR go up and down completely randomly.

Pair Corralation between M Food and Beta MWIG40TR

Assuming the 90 days trading horizon M Food SA is expected to generate 6.59 times more return on investment than Beta MWIG40TR. However, M Food is 6.59 times more volatile than Beta mWIG40TR Portfelowy. It trades about 0.15 of its potential returns per unit of risk. Beta mWIG40TR Portfelowy is currently generating about 0.27 per unit of risk. If you would invest  79.00  in M Food SA on December 30, 2024 and sell it today you would earn a total of  41.00  from holding M Food SA or generate 51.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.13%
Values	Daily Returns

M Food SA  vs.  Beta mWIG40TR Portfelowy

M Food SA

Risk-Adjusted Performance

Good

Over the last 90 days M Food SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, M Food reported solid returns over the last few months and may actually be approaching a breakup point.

Beta mWIG40TR Portfelowy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beta mWIG40TR Portfelowy are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beta MWIG40TR sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with M Food and Beta MWIG40TR

The main advantage of trading using opposite M Food and Beta MWIG40TR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Food position performs unexpectedly, Beta MWIG40TR 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 Beta MWIG40TR will offset losses from the drop in Beta MWIG40TR's long position.

The idea behind M Food SA and Beta mWIG40TR Portfelowy 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.