Correlation Between M Food and Play2Chill

Can any of the company-specific risk be diversified away by investing in both M Food and Play2Chill 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 Play2Chill 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 Play2Chill SA, you can compare the effects of market volatilities on M Food and Play2Chill 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 Play2Chill. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Food and Play2Chill.

Diversification Opportunities for M Food and Play2Chill

0.39

Correlation Coefficient

M Food  Play2Chill

Weak diversification

The 3 months correlation between MFD and Play2Chill is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding M Food SA and Play2Chill SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Play2Chill 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 Play2Chill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Play2Chill SA has no effect on the direction of M Food i.e., M Food and Play2Chill go up and down completely randomly.

Pair Corralation between M Food and Play2Chill

Assuming the 90 days trading horizon M Food SA is expected to under-perform the Play2Chill. In addition to that, M Food is 2.44 times more volatile than Play2Chill SA. It trades about -0.23 of its total potential returns per unit of risk. Play2Chill SA is currently generating about -0.43 per unit of volatility. If you would invest  444.00  in Play2Chill SA on October 7, 2024 and sell it today you would lose (54.00) from holding Play2Chill SA or give up 12.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	87.5%
Values	Daily Returns

M Food SA  vs.  Play2Chill SA

M Food SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days M Food SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Play2Chill SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Play2Chill SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Play2Chill 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 M Food and Play2Chill

The main advantage of trading using opposite M Food and Play2Chill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Food position performs unexpectedly, Play2Chill 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 Play2Chill will offset losses from the drop in Play2Chill's long position.

The idea behind M Food SA and Play2Chill 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.