Correlation Between MFEC PCL and Sky ICT

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

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

Diversification Opportunities for MFEC PCL and Sky ICT

-0.02

Correlation Coefficient

MFEC PCL  Sky ICT

Good diversification

The 3 months correlation between MFEC and Sky is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding MFEC PCL and Sky ICT Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky ICT 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 Sky ICT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky ICT Public has no effect on the direction of MFEC PCL i.e., MFEC PCL and Sky ICT go up and down completely randomly.

Pair Corralation between MFEC PCL and Sky ICT

Assuming the 90 days trading horizon MFEC PCL is expected to generate 2.04 times less return on investment than Sky ICT. But when comparing it to its historical volatility, MFEC PCL is 2.21 times less risky than Sky ICT. It trades about 0.01 of its potential returns per unit of risk. Sky ICT Public is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Sky ICT Public on October 11, 2024 and sell it today you would lose (10.00) from holding Sky ICT Public or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MFEC PCL  vs.  Sky ICT 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.

Sky ICT Public

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sky ICT Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Sky ICT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MFEC PCL and Sky ICT

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

The idea behind MFEC PCL and Sky ICT 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.