Correlation Between MFF Capital and Insignia Financial

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Can any of the company-specific risk be diversified away by investing in both MFF Capital and Insignia Financial 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 MFF Capital and Insignia Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFF Capital Investments and Insignia Financial, you can compare the effects of market volatilities on MFF Capital and Insignia Financial 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 MFF Capital with a short position of Insignia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFF Capital and Insignia Financial.

Diversification Opportunities for MFF Capital and Insignia Financial

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between MFF and Insignia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial and MFF Capital 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 MFF Capital Investments are associated (or correlated) with Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of MFF Capital i.e., MFF Capital and Insignia Financial go up and down completely randomly.

Pair Corralation between MFF Capital and Insignia Financial

Assuming the 90 days trading horizon MFF Capital is expected to generate 2.03 times less return on investment than Insignia Financial. But when comparing it to its historical volatility, MFF Capital Investments is 2.18 times less risky than Insignia Financial. It trades about 0.27 of its potential returns per unit of risk. Insignia Financial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  230.00  in Insignia Financial on September 5, 2024 and sell it today you would earn a total of  83.00  from holding Insignia Financial or generate 36.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

MFF Capital Investments  vs.  Insignia Financial

 Performance 
       Timeline  
MFF Capital Investments 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in MFF Capital Investments are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MFF Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.
Insignia Financial 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Insignia Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Insignia Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

MFF Capital and Insignia Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MFF Capital and Insignia Financial

The main advantage of trading using opposite MFF Capital and Insignia Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFF Capital position performs unexpectedly, Insignia Financial 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 Insignia Financial will offset losses from the drop in Insignia Financial's long position.
The idea behind MFF Capital Investments and Insignia Financial 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.
Check out your portfolio center.
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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