Correlation Between Inter Cars and MBank SA

Can any of the company-specific risk be diversified away by investing in both Inter Cars and MBank SA 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 Inter Cars and MBank SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Inter Cars SA and mBank SA, you can compare the effects of market volatilities on Inter Cars and MBank SA 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 Inter Cars with a short position of MBank SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inter Cars and MBank SA.

Diversification Opportunities for Inter Cars and MBank SA

0.37

Correlation Coefficient

Inter Cars  MBank SA

Weak diversification

The 3 months correlation between Inter and MBank is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Inter Cars SA and mBank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on mBank SA and Inter Cars 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 Inter Cars SA are associated (or correlated) with MBank SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of mBank SA has no effect on the direction of Inter Cars i.e., Inter Cars and MBank SA go up and down completely randomly.

Pair Corralation between Inter Cars and MBank SA

Assuming the 90 days trading horizon Inter Cars SA is expected to generate 0.88 times more return on investment than MBank SA. However, Inter Cars SA is 1.14 times less risky than MBank SA. It trades about 0.03 of its potential returns per unit of risk. mBank SA is currently generating about -0.11 per unit of risk. If you would invest  51,000  in Inter Cars SA on September 17, 2024 and sell it today you would earn a total of  1,500  from holding Inter Cars SA or generate 2.94% return on investment over 90 days.

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

Inter Cars SA  vs.  mBank SA

Inter Cars SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Cars SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Inter Cars is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

mBank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days mBank SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Inter Cars and MBank SA

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

The idea behind Inter Cars SA and mBank 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.