Correlation Between MFF Capital and Centaurus Metals

Can any of the company-specific risk be diversified away by investing in both MFF Capital and Centaurus Metals 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 MFF Capital and Centaurus Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MFF Capital Investments and Centaurus Metals, you can compare the effects of market volatilities on MFF Capital and Centaurus Metals 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 MFF Capital with a short position of Centaurus Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFF Capital and Centaurus Metals.

Diversification Opportunities for MFF Capital and Centaurus Metals

0.06

Correlation Coefficient

MFF Capital  Centaurus Metals

Significant diversification

The 3 months correlation between MFF and Centaurus is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Centaurus Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus Metals and MFF Capital 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 MFF Capital Investments are associated (or correlated) with Centaurus Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Metals has no effect on the direction of MFF Capital i.e., MFF Capital and Centaurus Metals go up and down completely randomly.

Pair Corralation between MFF Capital and Centaurus Metals

Assuming the 90 days trading horizon MFF Capital Investments is expected to under-perform the Centaurus Metals. But the stock apears to be less risky and, when comparing its historical volatility, MFF Capital Investments is 3.59 times less risky than Centaurus Metals. The stock trades about -0.11 of its potential returns per unit of risk. The Centaurus Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Centaurus Metals on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Centaurus Metals or generate 0.0% return on investment over 90 days.

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

MFF Capital Investments  vs.  Centaurus Metals

MFF Capital Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days MFF Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Centaurus Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Centaurus Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Centaurus Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MFF Capital and Centaurus Metals

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

The idea behind MFF Capital Investments and Centaurus Metals 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 Global Correlations module to find global opportunities by holding instruments from different markets.