Correlation Between MDM Permian and Image Protect

Can any of the company-specific risk be diversified away by investing in both MDM Permian and Image Protect 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 MDM Permian and Image Protect into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MDM Permian and Image Protect, you can compare the effects of market volatilities on MDM Permian and Image Protect 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 MDM Permian with a short position of Image Protect. Check out your portfolio center. Please also check ongoing floating volatility patterns of MDM Permian and Image Protect.

Diversification Opportunities for MDM Permian and Image Protect

-0.29

Correlation Coefficient

MDM Permian  Image Protect

Very good diversification

The 3 months correlation between MDM and Image is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding MDM Permian and Image Protect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Image Protect and MDM Permian 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 MDM Permian are associated (or correlated) with Image Protect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Image Protect has no effect on the direction of MDM Permian i.e., MDM Permian and Image Protect go up and down completely randomly.

Pair Corralation between MDM Permian and Image Protect

Given the investment horizon of 90 days MDM Permian is expected to generate 28.97 times less return on investment than Image Protect. But when comparing it to its historical volatility, MDM Permian is 10.31 times less risky than Image Protect. It trades about 0.05 of its potential returns per unit of risk. Image Protect is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Image Protect on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Image Protect or generate 0.0% return on investment over 90 days.

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

MDM Permian  vs.  Image Protect

MDM Permian

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MDM Permian are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, MDM Permian reported solid returns over the last few months and may actually be approaching a breakup point.

Image Protect

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Image Protect are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Image Protect disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MDM Permian and Image Protect

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

The idea behind MDM Permian and Image Protect 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.