Correlation Between MFEC PCL and Lam Soon

Can any of the company-specific risk be diversified away by investing in both MFEC PCL and Lam Soon 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 MFEC PCL and Lam Soon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MFEC PCL and Lam Soon Public, you can compare the effects of market volatilities on MFEC PCL and Lam Soon 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 MFEC PCL with a short position of Lam Soon. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFEC PCL and Lam Soon.

Diversification Opportunities for MFEC PCL and Lam Soon

0.35

Correlation Coefficient

MFEC PCL  Lam Soon

Weak diversification

The 3 months correlation between MFEC and Lam is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding MFEC PCL and Lam Soon Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lam Soon Public and MFEC PCL 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 MFEC PCL are associated (or correlated) with Lam Soon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lam Soon Public has no effect on the direction of MFEC PCL i.e., MFEC PCL and Lam Soon go up and down completely randomly.

Pair Corralation between MFEC PCL and Lam Soon

Assuming the 90 days trading horizon MFEC PCL is expected to under-perform the Lam Soon. In addition to that, MFEC PCL is 3.36 times more volatile than Lam Soon Public. It trades about -0.12 of its total potential returns per unit of risk. Lam Soon Public is currently generating about -0.32 per unit of volatility. If you would invest  498.00  in Lam Soon Public on October 9, 2024 and sell it today you would lose (12.00) from holding Lam Soon Public or give up 2.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MFEC PCL  vs.  Lam Soon Public

MFEC PCL

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MFEC PCL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, MFEC PCL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Lam Soon Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lam Soon Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Lam Soon is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MFEC PCL and Lam Soon

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

The idea behind MFEC PCL and Lam Soon Public 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.