Correlation Between M3 and Mitesco

Can any of the company-specific risk be diversified away by investing in both M3 and Mitesco 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 M3 and Mitesco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between M3 Inc and Mitesco, you can compare the effects of market volatilities on M3 and Mitesco 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 M3 with a short position of Mitesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of M3 and Mitesco.

Diversification Opportunities for M3 and Mitesco

0.21

Correlation Coefficient

M3  Mitesco

Modest diversification

The 3 months correlation between M3 and Mitesco is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding M3 Inc and Mitesco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitesco and M3 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 M3 Inc are associated (or correlated) with Mitesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitesco has no effect on the direction of M3 i.e., M3 and Mitesco go up and down completely randomly.

Pair Corralation between M3 and Mitesco

Assuming the 90 days horizon M3 is expected to generate 48.37 times less return on investment than Mitesco. But when comparing it to its historical volatility, M3 Inc is 11.35 times less risky than Mitesco. It trades about 0.03 of its potential returns per unit of risk. Mitesco is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Mitesco on September 8, 2024 and sell it today you would lose (3.00) from holding Mitesco or give up 10.34% of portfolio value over 90 days.

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

M3 Inc  vs.  Mitesco

M3 Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, M3 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mitesco

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitesco are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Mitesco demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with M3 and Mitesco

The main advantage of trading using opposite M3 and Mitesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M3 position performs unexpectedly, Mitesco 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 Mitesco will offset losses from the drop in Mitesco's long position.

The idea behind M3 Inc and Mitesco 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.