Correlation Between Notoria and M Food

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

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

Diversification Opportunities for Notoria and M Food

-0.31

Correlation Coefficient

Notoria  M Food

Very good diversification

The 3 months correlation between Notoria and MFD is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Notoria 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 Notoria 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 Notoria 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 Notoria i.e., Notoria and M Food go up and down completely randomly.

Pair Corralation between Notoria and M Food

Assuming the 90 days trading horizon Notoria is expected to generate 0.53 times more return on investment than M Food. However, Notoria is 1.89 times less risky than M Food. It trades about 0.3 of its potential returns per unit of risk. M Food SA is currently generating about 0.06 per unit of risk. If you would invest  585.00  in Notoria on September 4, 2024 and sell it today you would earn a total of  230.00  from holding Notoria or generate 39.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.72%
Values	Daily Returns

Notoria  vs.  M Food SA

Notoria

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Notoria are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Notoria reported solid returns over the last few months and may actually be approaching a breakup point.

M Food SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in M Food SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, M Food reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Notoria and M Food

The main advantage of trading using opposite Notoria and M Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Notoria 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 Notoria 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.