Correlation Between MRF and WESTLIFE FOODWORLD

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

By analyzing existing cross correlation between MRF Limited and WESTLIFE FOODWORLD LIMITED, you can compare the effects of market volatilities on MRF and WESTLIFE FOODWORLD 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 MRF with a short position of WESTLIFE FOODWORLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRF and WESTLIFE FOODWORLD.

Diversification Opportunities for MRF and WESTLIFE FOODWORLD

0.72

Correlation Coefficient

MRF  WESTLIFE FOODWORLD

Poor diversification

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

Pair Corralation between MRF and WESTLIFE FOODWORLD

Assuming the 90 days trading horizon MRF Limited is expected to under-perform the WESTLIFE FOODWORLD. But the stock apears to be less risky and, when comparing its historical volatility, MRF Limited is 2.39 times less risky than WESTLIFE FOODWORLD. The stock trades about -0.17 of its potential returns per unit of risk. The WESTLIFE FOODWORLD LIMITED is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  81,990  in WESTLIFE FOODWORLD LIMITED on December 25, 2024 and sell it today you would lose (8,885) from holding WESTLIFE FOODWORLD LIMITED or give up 10.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

MRF Limited  vs.  WESTLIFE FOODWORLD LIMITED

MRF Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

WESTLIFE FOODWORLD

Risk-Adjusted Performance

Very Weak

Over the last 90 days WESTLIFE FOODWORLD LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with MRF and WESTLIFE FOODWORLD

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

The idea behind MRF Limited and WESTLIFE FOODWORLD LIMITED 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.