Correlation Between Mecanica Fina and Safetech Innovations

Can any of the company-specific risk be diversified away by investing in both Mecanica Fina and Safetech Innovations 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 Mecanica Fina and Safetech Innovations into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Mecanica Fina and Safetech Innovations

0.69

Correlation Coefficient

Mecanica Fina  Safetech Innovations

Poor diversification

The 3 months correlation between Mecanica and Safetech is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mecanica Fina SA and Safetech Innovations SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safetech Innovations and Mecanica Fina 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 Mecanica Fina SA are associated (or correlated) with Safetech Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safetech Innovations has no effect on the direction of Mecanica Fina i.e., Mecanica Fina and Safetech Innovations go up and down completely randomly.

Pair Corralation between Mecanica Fina and Safetech Innovations

Assuming the 90 days trading horizon Mecanica Fina SA is expected to under-perform the Safetech Innovations. In addition to that, Mecanica Fina is 1.82 times more volatile than Safetech Innovations SA. It trades about -0.1 of its total potential returns per unit of risk. Safetech Innovations SA is currently generating about -0.09 per unit of volatility. If you would invest  103.00  in Safetech Innovations SA on September 12, 2024 and sell it today you would lose (8.00) from holding Safetech Innovations SA or give up 7.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Mecanica Fina SA  vs.  Safetech Innovations SA

Mecanica Fina SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mecanica Fina SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Safetech Innovations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safetech Innovations SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Mecanica Fina and Safetech Innovations

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

The idea behind Mecanica Fina SA and Safetech Innovations 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.