Correlation Between Merafe Resources and WIMFARM SA

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

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

Diversification Opportunities for Merafe Resources and WIMFARM SA

0.24

Correlation Coefficient

Merafe Resources  WIMFARM SA

Modest diversification

The 3 months correlation between Merafe and WIMFARM is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Merafe Resources Limited and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO and Merafe Resources 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 Merafe Resources Limited are associated (or correlated) with WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of Merafe Resources i.e., Merafe Resources and WIMFARM SA go up and down completely randomly.

Pair Corralation between Merafe Resources and WIMFARM SA

Assuming the 90 days horizon Merafe Resources Limited is expected to generate 0.91 times more return on investment than WIMFARM SA. However, Merafe Resources Limited is 1.1 times less risky than WIMFARM SA. It trades about 0.02 of its potential returns per unit of risk. WIMFARM SA EO is currently generating about -0.03 per unit of risk. If you would invest  7.50  in Merafe Resources Limited on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Merafe Resources Limited or generate 0.0% return on investment over 90 days.

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

Merafe Resources Limited  vs.  WIMFARM SA EO

Merafe Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merafe Resources Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Merafe Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WIMFARM SA EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIMFARM SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WIMFARM SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Merafe Resources and WIMFARM SA

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

The idea behind Merafe Resources Limited and WIMFARM SA EO 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.