Correlation Between MFF Capital and Home Consortium

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

Diversification Opportunities for MFF Capital and Home Consortium

0.5

Correlation Coefficient

MFF Capital  Home Consortium

Very weak diversification

The 3 months correlation between MFF and Home is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Home Consortium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Consortium 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 Home Consortium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Consortium has no effect on the direction of MFF Capital i.e., MFF Capital and Home Consortium go up and down completely randomly.

Pair Corralation between MFF Capital and Home Consortium

Assuming the 90 days trading horizon MFF Capital is expected to generate 1.49 times less return on investment than Home Consortium. But when comparing it to its historical volatility, MFF Capital Investments is 1.97 times less risky than Home Consortium. It trades about 0.14 of its potential returns per unit of risk. Home Consortium is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  620.00  in Home Consortium on October 7, 2024 and sell it today you would earn a total of  375.00  from holding Home Consortium or generate 60.48% return on investment over 90 days.

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

MFF Capital Investments  vs.  Home Consortium

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.

Home Consortium

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Consortium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Home Consortium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MFF Capital and Home Consortium

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

The idea behind MFF Capital Investments and Home Consortium 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.