Correlation Between Multiexport Foods and Salfacorp

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

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

Diversification Opportunities for Multiexport Foods and Salfacorp

0.1

Correlation Coefficient

Multiexport Foods  Salfacorp

Average diversification

The 3 months correlation between Multiexport and Salfacorp is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Multiexport Foods SA and Salfacorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salfacorp and Multiexport Foods 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 Multiexport Foods SA are associated (or correlated) with Salfacorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salfacorp has no effect on the direction of Multiexport Foods i.e., Multiexport Foods and Salfacorp go up and down completely randomly.

Pair Corralation between Multiexport Foods and Salfacorp

Assuming the 90 days trading horizon Multiexport Foods SA is expected to generate 0.75 times more return on investment than Salfacorp. However, Multiexport Foods SA is 1.33 times less risky than Salfacorp. It trades about 0.15 of its potential returns per unit of risk. Salfacorp is currently generating about 0.06 per unit of risk. If you would invest  19,364  in Multiexport Foods SA on September 13, 2024 and sell it today you would earn a total of  1,036  from holding Multiexport Foods SA or generate 5.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	69.49%
Values	Daily Returns

Multiexport Foods SA  vs.  Salfacorp

Multiexport Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multiexport Foods SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Multiexport Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Salfacorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Salfacorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Salfacorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Multiexport Foods and Salfacorp

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

The idea behind Multiexport Foods SA and Salfacorp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.