Correlation Between MST Investment and Idico JSC

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

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

Diversification Opportunities for MST Investment and Idico JSC

-0.14

Correlation Coefficient

MST Investment  Idico JSC

Good diversification

The 3 months correlation between MST and Idico is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding MST Investment JSC and Idico JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idico JSC and MST Investment 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 MST Investment JSC are associated (or correlated) with Idico JSC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idico JSC has no effect on the direction of MST Investment i.e., MST Investment and Idico JSC go up and down completely randomly.

Pair Corralation between MST Investment and Idico JSC

Assuming the 90 days trading horizon MST Investment JSC is expected to generate 2.15 times more return on investment than Idico JSC. However, MST Investment is 2.15 times more volatile than Idico JSC. It trades about -0.01 of its potential returns per unit of risk. Idico JSC is currently generating about -0.07 per unit of risk. If you would invest  680,000  in MST Investment JSC on December 28, 2024 and sell it today you would lose (20,000) from holding MST Investment JSC or give up 2.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

MST Investment JSC  vs.  Idico JSC

MST Investment JSC

Risk-Adjusted Performance

Very Weak

Over the last 90 days MST Investment JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, MST Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Idico JSC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Idico JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Idico JSC is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MST Investment and Idico JSC

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

The idea behind MST Investment JSC and Idico JSC 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.