Correlation Between MFF Capital and Super Retail

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

Diversification Opportunities for MFF Capital and Super Retail

0.72

Correlation Coefficient

MFF Capital  Super Retail

Poor diversification

The 3 months correlation between MFF and Super is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Super Retail Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Retail Group 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 Super Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Retail Group has no effect on the direction of MFF Capital i.e., MFF Capital and Super Retail go up and down completely randomly.

Pair Corralation between MFF Capital and Super Retail

Assuming the 90 days trading horizon MFF Capital Investments is expected to generate 0.46 times more return on investment than Super Retail. However, MFF Capital Investments is 2.19 times less risky than Super Retail. It trades about -0.22 of its potential returns per unit of risk. Super Retail Group is currently generating about -0.11 per unit of risk. If you would invest  469.00  in MFF Capital Investments on December 4, 2024 and sell it today you would lose (31.00) from holding MFF Capital Investments or give up 6.61% of portfolio value over 90 days.

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

MFF Capital Investments  vs.  Super Retail Group

MFF Capital Investments

Risk-Adjusted Performance

Very Weak

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

Super Retail Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Super Retail Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Super Retail 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 Super Retail

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

The idea behind MFF Capital Investments and Super Retail Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.