Correlation Between SAF Special and MFC Industrial

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

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

Diversification Opportunities for SAF Special and MFC Industrial

-0.16

Correlation Coefficient

SAF Special  MFC Industrial

Good diversification

The 3 months correlation between SAF and MFC is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding SAF Special Steel and MFC Industrial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFC Industrial Investment and SAF Special 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 SAF Special Steel are associated (or correlated) with MFC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFC Industrial Investment has no effect on the direction of SAF Special i.e., SAF Special and MFC Industrial go up and down completely randomly.

Pair Corralation between SAF Special and MFC Industrial

Assuming the 90 days trading horizon SAF Special is expected to generate 2.82 times less return on investment than MFC Industrial. In addition to that, SAF Special is 4.77 times more volatile than MFC Industrial Investment. It trades about 0.02 of its total potential returns per unit of risk. MFC Industrial Investment is currently generating about 0.22 per unit of volatility. If you would invest  557.00  in MFC Industrial Investment on September 4, 2024 and sell it today you would earn a total of  78.00  from holding MFC Industrial Investment or generate 14.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

SAF Special Steel  vs.  MFC Industrial Investment

SAF Special Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SAF Special Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, SAF Special is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

MFC Industrial Investment

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MFC Industrial Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, MFC Industrial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAF Special and MFC Industrial

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

The idea behind SAF Special Steel and MFC Industrial Investment 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.