Correlation Between Merafe Resources and Montea CVA

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

Diversification Opportunities for Merafe Resources and Montea CVA

-0.39

Correlation Coefficient

Merafe Resources  Montea CVA

Very good diversification

The 3 months correlation between Merafe and Montea is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Merafe Resources Limited and Montea CVA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montea CVA 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 Montea CVA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montea CVA has no effect on the direction of Merafe Resources i.e., Merafe Resources and Montea CVA go up and down completely randomly.

Pair Corralation between Merafe Resources and Montea CVA

Assuming the 90 days horizon Merafe Resources Limited is expected to under-perform the Montea CVA. In addition to that, Merafe Resources is 2.94 times more volatile than Montea CVA. It trades about -0.07 of its total potential returns per unit of risk. Montea CVA is currently generating about -0.02 per unit of volatility. If you would invest  6,530  in Montea CVA on December 4, 2024 and sell it today you would lose (50.00) from holding Montea CVA or give up 0.77% 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.  Montea CVA

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.

Montea CVA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Montea CVA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Montea CVA 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 Montea CVA

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

The idea behind Merafe Resources Limited and Montea CVA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.