Correlation Between Menif Financial and Discount Investment

Can any of the company-specific risk be diversified away by investing in both Menif Financial and Discount Investment 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 Menif Financial and Discount Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Menif Financial Services and Discount Investment Corp, you can compare the effects of market volatilities on Menif Financial and Discount Investment 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 Menif Financial with a short position of Discount Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Menif Financial and Discount Investment.

Diversification Opportunities for Menif Financial and Discount Investment

0.56

Correlation Coefficient

Menif Financial  Discount Investment

Very weak diversification

The 3 months correlation between Menif and Discount is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Menif Financial Services and Discount Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discount Investment Corp and Menif Financial 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 Menif Financial Services are associated (or correlated) with Discount Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discount Investment Corp has no effect on the direction of Menif Financial i.e., Menif Financial and Discount Investment go up and down completely randomly.

Pair Corralation between Menif Financial and Discount Investment

Assuming the 90 days trading horizon Menif Financial Services is expected to generate 0.59 times more return on investment than Discount Investment. However, Menif Financial Services is 1.68 times less risky than Discount Investment. It trades about 0.12 of its potential returns per unit of risk. Discount Investment Corp is currently generating about -0.01 per unit of risk. If you would invest  82,627  in Menif Financial Services on October 25, 2024 and sell it today you would earn a total of  102,373  from holding Menif Financial Services or generate 123.9% return on investment over 90 days.

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

Menif Financial Services  vs.  Discount Investment Corp

Menif Financial Services

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Menif Financial Services are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Menif Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Discount Investment Corp

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Menif Financial and Discount Investment

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

The idea behind Menif Financial Services and Discount Investment Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.