Correlation Between Super Retail and MFF Capital

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

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

Diversification Opportunities for Super Retail and MFF Capital

-0.22

Correlation Coefficient

Super Retail  MFF Capital

Very good diversification

The 3 months correlation between Super and MFF is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Super Retail Group and MFF Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFF Capital Investments and Super Retail 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 Super Retail Group are associated (or correlated) with MFF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFF Capital Investments has no effect on the direction of Super Retail i.e., Super Retail and MFF Capital go up and down completely randomly.

Pair Corralation between Super Retail and MFF Capital

Assuming the 90 days trading horizon Super Retail Group is expected to generate 1.95 times more return on investment than MFF Capital. However, Super Retail is 1.95 times more volatile than MFF Capital Investments. It trades about 0.12 of its potential returns per unit of risk. MFF Capital Investments is currently generating about 0.21 per unit of risk. If you would invest  1,482  in Super Retail Group on October 20, 2024 and sell it today you would earn a total of  46.00  from holding Super Retail Group or generate 3.1% return on investment over 90 days.

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

Super Retail Group  vs.  MFF Capital Investments

Super Retail Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Super Retail Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

MFF Capital Investments

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MFF Capital Investments are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MFF Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Super Retail and MFF Capital

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

The idea behind Super Retail Group and MFF Capital Investments 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.