Correlation Between COMPUTERSHARE and MBANK

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

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

Diversification Opportunities for COMPUTERSHARE and MBANK

0.77

Correlation Coefficient

COMPUTERSHARE  MBANK

Poor diversification

The 3 months correlation between COMPUTERSHARE and MBANK is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding COMPUTERSHARE and MBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBANK and COMPUTERSHARE 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 COMPUTERSHARE are associated (or correlated) with MBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBANK has no effect on the direction of COMPUTERSHARE i.e., COMPUTERSHARE and MBANK go up and down completely randomly.

Pair Corralation between COMPUTERSHARE and MBANK

Assuming the 90 days trading horizon COMPUTERSHARE is expected to generate 3.1 times less return on investment than MBANK. In addition to that, COMPUTERSHARE is 1.07 times more volatile than MBANK. It trades about 0.1 of its total potential returns per unit of risk. MBANK is currently generating about 0.32 per unit of volatility. If you would invest  12,225  in MBANK on December 25, 2024 and sell it today you would earn a total of  7,055  from holding MBANK or generate 57.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

COMPUTERSHARE  vs.  MBANK

COMPUTERSHARE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTERSHARE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, COMPUTERSHARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

MBANK

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MBANK are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MBANK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COMPUTERSHARE and MBANK

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

The idea behind COMPUTERSHARE and MBANK 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.