Correlation Between MUA and ABC BANKING

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

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

Diversification Opportunities for MUA and ABC BANKING

-0.69

Correlation Coefficient

MUA  ABC BANKING

Excellent diversification

The 3 months correlation between MUA and ABC is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding MUA LTD and ABC BANKING PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC BANKING PORATION and MUA 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 MUA LTD are associated (or correlated) with ABC BANKING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC BANKING PORATION has no effect on the direction of MUA i.e., MUA and ABC BANKING go up and down completely randomly.

Pair Corralation between MUA and ABC BANKING

Assuming the 90 days trading horizon MUA is expected to generate 1.91 times less return on investment than ABC BANKING. But when comparing it to its historical volatility, MUA LTD is 3.52 times less risky than ABC BANKING. It trades about 0.19 of its potential returns per unit of risk. ABC BANKING PORATION is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,990  in ABC BANKING PORATION on October 12, 2024 and sell it today you would earn a total of  60.00  from holding ABC BANKING PORATION or generate 3.02% return on investment over 90 days.

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

MUA LTD  vs.  ABC BANKING PORATION

MUA LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MUA LTD 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 primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ABC BANKING PORATION

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with MUA and ABC BANKING

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

The idea behind MUA LTD and ABC BANKING PORATION 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.