Correlation Between MW Trade and Creotech Instruments

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

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

Diversification Opportunities for MW Trade and Creotech Instruments

0.37

Correlation Coefficient

MW Trade  Creotech Instruments

Weak diversification

The 3 months correlation between MWT and Creotech is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding MW Trade SA and Creotech Instruments SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Creotech Instruments and MW Trade 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 MW Trade SA are associated (or correlated) with Creotech Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Creotech Instruments has no effect on the direction of MW Trade i.e., MW Trade and Creotech Instruments go up and down completely randomly.

Pair Corralation between MW Trade and Creotech Instruments

Assuming the 90 days trading horizon MW Trade is expected to generate 6.26 times less return on investment than Creotech Instruments. In addition to that, MW Trade is 1.33 times more volatile than Creotech Instruments SA. It trades about 0.02 of its total potential returns per unit of risk. Creotech Instruments SA is currently generating about 0.17 per unit of volatility. If you would invest  14,500  in Creotech Instruments SA on December 1, 2024 and sell it today you would earn a total of  4,600  from holding Creotech Instruments SA or generate 31.72% return on investment over 90 days.

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

MW Trade SA  vs.  Creotech Instruments SA

MW Trade SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MW Trade SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, MW Trade is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Creotech Instruments

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Creotech Instruments SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Creotech Instruments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MW Trade and Creotech Instruments

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

The idea behind MW Trade SA and Creotech Instruments SA 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 Transaction History module to view history of all your transactions and understand their impact on performance.