Correlation Between Mitie Group and Future Metals

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

By analyzing existing cross correlation between Mitie Group PLC and Future Metals NL, you can compare the effects of market volatilities on Mitie Group and Future Metals 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 Mitie Group with a short position of Future Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitie Group and Future Metals.

Diversification Opportunities for Mitie Group and Future Metals

0.21

Correlation Coefficient

Mitie Group  Future Metals

Modest diversification

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

Pair Corralation between Mitie Group and Future Metals

Assuming the 90 days trading horizon Mitie Group PLC is expected to generate 0.29 times more return on investment than Future Metals. However, Mitie Group PLC is 3.4 times less risky than Future Metals. It trades about 0.08 of its potential returns per unit of risk. Future Metals NL is currently generating about -0.02 per unit of risk. If you would invest  10,960  in Mitie Group PLC on December 29, 2024 and sell it today you would earn a total of  660.00  from holding Mitie Group PLC or generate 6.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Mitie Group PLC  vs.  Future Metals NL

Mitie Group PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitie Group PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Mitie Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Future Metals NL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Future Metals NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Future Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mitie Group and Future Metals

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

The idea behind Mitie Group PLC and Future Metals NL 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.