Correlation Between MTY Food and Cerrado Gold

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

By analyzing existing cross correlation between MTY Food Group and Cerrado Gold Corp, you can compare the effects of market volatilities on MTY Food and Cerrado Gold 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 MTY Food with a short position of Cerrado Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTY Food and Cerrado Gold.

Diversification Opportunities for MTY Food and Cerrado Gold

-0.39

Correlation Coefficient

MTY Food  Cerrado Gold

Very good diversification

The 3 months correlation between MTY and Cerrado is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding MTY Food Group and Cerrado Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerrado Gold Corp and MTY Food 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 MTY Food Group are associated (or correlated) with Cerrado Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerrado Gold Corp has no effect on the direction of MTY Food i.e., MTY Food and Cerrado Gold go up and down completely randomly.

Pair Corralation between MTY Food and Cerrado Gold

Assuming the 90 days trading horizon MTY Food Group is expected to under-perform the Cerrado Gold. But the stock apears to be less risky and, when comparing its historical volatility, MTY Food Group is 3.76 times less risky than Cerrado Gold. The stock trades about -0.03 of its potential returns per unit of risk. The Cerrado Gold Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Cerrado Gold Corp on October 25, 2024 and sell it today you would lose (46.00) from holding Cerrado Gold Corp or give up 51.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

MTY Food Group  vs.  Cerrado Gold Corp

MTY Food Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MTY Food may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cerrado Gold Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cerrado Gold Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Cerrado Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTY Food and Cerrado Gold

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

The idea behind MTY Food Group and Cerrado Gold 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.