Correlation Between MBank SA and New Tech

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

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

Diversification Opportunities for MBank SA and New Tech

0.81

Correlation Coefficient

MBank SA  New Tech

Very poor diversification

The 3 months correlation between MBank and New is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding mBank SA and New Tech Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Tech Capital and MBank SA 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 mBank SA are associated (or correlated) with New Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Tech Capital has no effect on the direction of MBank SA i.e., MBank SA and New Tech go up and down completely randomly.

Pair Corralation between MBank SA and New Tech

Assuming the 90 days trading horizon mBank SA is expected to generate 0.35 times more return on investment than New Tech. However, mBank SA is 2.83 times less risky than New Tech. It trades about -0.08 of its potential returns per unit of risk. New Tech Capital is currently generating about -0.16 per unit of risk. If you would invest  63,440  in mBank SA on September 14, 2024 and sell it today you would lose (6,800) from holding mBank SA or give up 10.72% of portfolio value over 90 days.

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

mBank SA  vs.  New Tech Capital

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 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.

New Tech Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Tech Capital 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 MBank SA and New Tech

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

The idea behind mBank SA and New Tech Capital 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.