Correlation Between M Food and Bank Millennium

Can any of the company-specific risk be diversified away by investing in both M Food and Bank Millennium 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 Bank Millennium 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 Bank Millennium SA, you can compare the effects of market volatilities on M Food and Bank Millennium 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 Bank Millennium. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Food and Bank Millennium.

Diversification Opportunities for M Food and Bank Millennium

0.59

Correlation Coefficient

M Food  Bank Millennium

Very weak diversification

The 3 months correlation between MFD and Bank is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding M Food SA and Bank Millennium SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Millennium SA 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 Bank Millennium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Millennium SA has no effect on the direction of M Food i.e., M Food and Bank Millennium go up and down completely randomly.

Pair Corralation between M Food and Bank Millennium

Assuming the 90 days trading horizon M Food SA is expected to generate 2.26 times more return on investment than Bank Millennium. However, M Food is 2.26 times more volatile than Bank Millennium SA. It trades about 0.06 of its potential returns per unit of risk. Bank Millennium SA is currently generating about -0.06 per unit of risk. If you would invest  105.00  in M Food SA on September 4, 2024 and sell it today you would earn a total of  8.00  from holding M Food SA or generate 7.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	58.73%
Values	Daily Returns

M Food SA  vs.  Bank Millennium SA

M Food SA

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M Food SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, M Food reported solid returns over the last few months and may actually be approaching a breakup point.

Bank Millennium SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Millennium 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.

Pair Trading with M Food and Bank Millennium

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

The idea behind M Food SA and Bank Millennium 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.