Correlation Between Merafe Resources and Iep Invest

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

Diversification Opportunities for Merafe Resources and Iep Invest

-0.04

Correlation Coefficient

Merafe Resources  Iep Invest

Good diversification

The 3 months correlation between Merafe and Iep is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Merafe Resources Limited and Iep Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iep Invest 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 Iep Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iep Invest has no effect on the direction of Merafe Resources i.e., Merafe Resources and Iep Invest go up and down completely randomly.

Pair Corralation between Merafe Resources and Iep Invest

Assuming the 90 days horizon Merafe Resources Limited is expected to under-perform the Iep Invest. In addition to that, Merafe Resources is 2.15 times more volatile than Iep Invest. It trades about -0.03 of its total potential returns per unit of risk. Iep Invest is currently generating about -0.03 per unit of volatility. If you would invest  580.00  in Iep Invest on December 27, 2024 and sell it today you would lose (40.00) from holding Iep Invest or give up 6.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Merafe Resources Limited  vs.  Iep Invest

Merafe Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merafe Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Iep Invest

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iep Invest has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Iep Invest is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Merafe Resources and Iep Invest

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

The idea behind Merafe Resources Limited and Iep Invest 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.