Correlation Between M Food and Quantum Software

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

Diversification Opportunities for M Food and Quantum Software

0.3

Correlation Coefficient

M Food  Quantum Software

Weak diversification

The 3 months correlation between MFD and Quantum is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding M Food SA and Quantum Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantum Software 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 Quantum Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantum Software has no effect on the direction of M Food i.e., M Food and Quantum Software go up and down completely randomly.

Pair Corralation between M Food and Quantum Software

Assuming the 90 days trading horizon M Food SA is expected to generate 2.19 times more return on investment than Quantum Software. However, M Food is 2.19 times more volatile than Quantum Software SA. It trades about 0.14 of its potential returns per unit of risk. Quantum Software SA is currently generating about 0.04 per unit of risk. If you would invest  82.00  in M Food SA on December 27, 2024 and sell it today you would earn a total of  38.00  from holding M Food SA or generate 46.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.52%
Values	Daily Returns

M Food SA  vs.  Quantum Software SA

M Food SA

Risk-Adjusted Performance

OK

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.

Quantum Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum Software SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Quantum Software may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with M Food and Quantum Software

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

The idea behind M Food SA and Quantum Software 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.