Correlation Between Vienna Insurance and Merafe Resources

Can any of the company-specific risk be diversified away by investing in both Vienna Insurance and Merafe Resources 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 Vienna Insurance and Merafe Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vienna Insurance Group and Merafe Resources Limited, you can compare the effects of market volatilities on Vienna Insurance and Merafe Resources 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 Vienna Insurance with a short position of Merafe Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vienna Insurance and Merafe Resources.

Diversification Opportunities for Vienna Insurance and Merafe Resources

0.44

Correlation Coefficient

Vienna Insurance  Merafe Resources

Very weak diversification

The 3 months correlation between Vienna and Merafe is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vienna Insurance Group and Merafe Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merafe Resources and Vienna Insurance 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 Vienna Insurance Group are associated (or correlated) with Merafe Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merafe Resources has no effect on the direction of Vienna Insurance i.e., Vienna Insurance and Merafe Resources go up and down completely randomly.

Pair Corralation between Vienna Insurance and Merafe Resources

Assuming the 90 days trading horizon Vienna Insurance is expected to generate 3.85 times less return on investment than Merafe Resources. But when comparing it to its historical volatility, Vienna Insurance Group is 5.13 times less risky than Merafe Resources. It trades about 0.05 of its potential returns per unit of risk. Merafe Resources Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7.40  in Merafe Resources Limited on October 25, 2024 and sell it today you would earn a total of  0.20  from holding Merafe Resources Limited or generate 2.7% return on investment over 90 days.

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

Vienna Insurance Group  vs.  Merafe Resources Limited

Vienna Insurance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vienna Insurance Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vienna Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Merafe Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merafe Resources Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Merafe Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vienna Insurance and Merafe Resources

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

The idea behind Vienna Insurance Group and Merafe Resources Limited 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.