Correlation Between MUA and NEW MAURITIUS

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

By analyzing existing cross correlation between MUA LTD and NEW MAURITIUS HOTELS, you can compare the effects of market volatilities on MUA and NEW MAURITIUS 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 NEW MAURITIUS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MUA and NEW MAURITIUS.

Diversification Opportunities for MUA and NEW MAURITIUS

0.61

Correlation Coefficient

MUA  NEW MAURITIUS

Poor diversification

The 3 months correlation between MUA and NEW is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MUA LTD and NEW MAURITIUS HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW MAURITIUS HOTELS 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 NEW MAURITIUS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW MAURITIUS HOTELS has no effect on the direction of MUA i.e., MUA and NEW MAURITIUS go up and down completely randomly.

Pair Corralation between MUA and NEW MAURITIUS

Assuming the 90 days trading horizon MUA LTD is expected to generate 0.32 times more return on investment than NEW MAURITIUS. However, MUA LTD is 3.09 times less risky than NEW MAURITIUS. It trades about -0.08 of its potential returns per unit of risk. NEW MAURITIUS HOTELS is currently generating about -0.03 per unit of risk. If you would invest  5,950  in MUA LTD on December 20, 2024 and sell it today you would lose (150.00) from holding MUA LTD or give up 2.52% of portfolio value over 90 days.

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

MUA LTD  vs.  NEW MAURITIUS HOTELS

MUA LTD

Risk-Adjusted Performance

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 very healthy primary indicators, MUA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

NEW MAURITIUS HOTELS

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEW MAURITIUS HOTELS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, NEW MAURITIUS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MUA and NEW MAURITIUS

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

The idea behind MUA LTD and NEW MAURITIUS HOTELS 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.