Correlation Between MFF Capital and Staude Capital

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

Diversification Opportunities for MFF Capital and Staude Capital

0.8

Correlation Coefficient

MFF Capital  Staude Capital

Very poor diversification

The 3 months correlation between MFF and Staude is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Staude Capital Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Staude Capital Global 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 Staude Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Staude Capital Global has no effect on the direction of MFF Capital i.e., MFF Capital and Staude Capital go up and down completely randomly.

Pair Corralation between MFF Capital and Staude Capital

Assuming the 90 days trading horizon MFF Capital Investments is expected to generate 0.99 times more return on investment than Staude Capital. However, MFF Capital Investments is 1.02 times less risky than Staude Capital. It trades about 0.15 of its potential returns per unit of risk. Staude Capital Global is currently generating about 0.08 per unit of risk. If you would invest  285.00  in MFF Capital Investments on October 5, 2024 and sell it today you would earn a total of  184.00  from holding MFF Capital Investments or generate 64.56% return on investment over 90 days.

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

MFF Capital Investments  vs.  Staude Capital Global

MFF Capital Investments

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MFF Capital Investments are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MFF Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Staude Capital Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Staude Capital Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Staude Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MFF Capital and Staude Capital

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

The idea behind MFF Capital Investments and Staude Capital Global 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.