Correlation Between SOFTWARE MANSION and MCI Management

Can any of the company-specific risk be diversified away by investing in both SOFTWARE MANSION and MCI Management 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 SOFTWARE MANSION and MCI Management into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SOFTWARE MANSION SPOLKA and MCI Management SA, you can compare the effects of market volatilities on SOFTWARE MANSION and MCI Management 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 SOFTWARE MANSION with a short position of MCI Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFTWARE MANSION and MCI Management.

Diversification Opportunities for SOFTWARE MANSION and MCI Management

0.48

Correlation Coefficient

SOFTWARE MANSION  MCI Management

Very weak diversification

The 3 months correlation between SOFTWARE and MCI is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding SOFTWARE MANSION SPOLKA and MCI Management SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCI Management SA and SOFTWARE MANSION 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 SOFTWARE MANSION SPOLKA are associated (or correlated) with MCI Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCI Management SA has no effect on the direction of SOFTWARE MANSION i.e., SOFTWARE MANSION and MCI Management go up and down completely randomly.

Pair Corralation between SOFTWARE MANSION and MCI Management

Assuming the 90 days trading horizon SOFTWARE MANSION SPOLKA is expected to generate 2.48 times more return on investment than MCI Management. However, SOFTWARE MANSION is 2.48 times more volatile than MCI Management SA. It trades about -0.05 of its potential returns per unit of risk. MCI Management SA is currently generating about -0.21 per unit of risk. If you would invest  3,060  in SOFTWARE MANSION SPOLKA on October 11, 2024 and sell it today you would lose (60.00) from holding SOFTWARE MANSION SPOLKA or give up 1.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

SOFTWARE MANSION SPOLKA  vs.  MCI Management SA

SOFTWARE MANSION SPOLKA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOFTWARE MANSION SPOLKA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

MCI Management SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCI Management SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with SOFTWARE MANSION and MCI Management

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

The idea behind SOFTWARE MANSION SPOLKA and MCI Management SA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.