Correlation Between M Food and Road Studio

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

Diversification Opportunities for M Food and Road Studio

0.03

Correlation Coefficient

M Food  Road Studio

Significant diversification

The 3 months correlation between MFD and Road is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding M Food SA and Road Studio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Road Studio 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 Road Studio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Road Studio SA has no effect on the direction of M Food i.e., M Food and Road Studio go up and down completely randomly.

Pair Corralation between M Food and Road Studio

Assuming the 90 days trading horizon M Food SA is expected to under-perform the Road Studio. But the stock apears to be less risky and, when comparing its historical volatility, M Food SA is 1.12 times less risky than Road Studio. The stock trades about -0.43 of its potential returns per unit of risk. The Road Studio SA is currently generating about -0.28 of returns per unit of risk over similar time horizon. If you would invest  614.00  in Road Studio SA on September 12, 2024 and sell it today you would lose (164.00) from holding Road Studio SA or give up 26.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	52.38%
Values	Daily Returns

M Food SA  vs.  Road Studio 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 relatively invariable basic indicators, M Food is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Road Studio SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Road Studio 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 January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with M Food and Road Studio

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

The idea behind M Food SA and Road Studio 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.