Correlation Between MW Trade and M Food

Can any of the company-specific risk be diversified away by investing in both MW Trade and M Food 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 M Food 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 M Food SA, you can compare the effects of market volatilities on MW Trade and M Food 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 M Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of MW Trade and M Food.

Diversification Opportunities for MW Trade and M Food

0.36

Correlation Coefficient

MW Trade  M Food

Weak diversification

The 3 months correlation between MWT and MFD is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding MW Trade SA and M Food SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Food SA 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 M Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Food SA has no effect on the direction of MW Trade i.e., MW Trade and M Food go up and down completely randomly.

Pair Corralation between MW Trade and M Food

Assuming the 90 days trading horizon MW Trade SA is expected to generate 0.45 times more return on investment than M Food. However, MW Trade SA is 2.24 times less risky than M Food. It trades about -0.15 of its potential returns per unit of risk. M Food SA is currently generating about -0.13 per unit of risk. If you would invest  580.00  in MW Trade SA on October 12, 2024 and sell it today you would lose (302.00) from holding MW Trade SA or give up 52.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	62.64%
Values	Daily Returns

MW Trade SA  vs.  M Food SA

MW Trade SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MW Trade SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

M Food SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days M Food SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with MW Trade and M Food

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

The idea behind MW Trade SA and M Food 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.