Correlation Between Mowi ASA and GrainCorp

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

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

Diversification Opportunities for Mowi ASA and GrainCorp

-0.32

Correlation Coefficient

Mowi ASA  GrainCorp

Very good diversification

The 3 months correlation between Mowi and GrainCorp is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Mowi ASA and GrainCorp Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrainCorp Limited and Mowi ASA 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 Mowi ASA are associated (or correlated) with GrainCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrainCorp Limited has no effect on the direction of Mowi ASA i.e., Mowi ASA and GrainCorp go up and down completely randomly.

Pair Corralation between Mowi ASA and GrainCorp

Assuming the 90 days horizon Mowi ASA is expected to generate 0.45 times more return on investment than GrainCorp. However, Mowi ASA is 2.2 times less risky than GrainCorp. It trades about -0.02 of its potential returns per unit of risk. GrainCorp Limited is currently generating about -0.06 per unit of risk. If you would invest  1,805  in Mowi ASA on September 2, 2024 and sell it today you would lose (33.00) from holding Mowi ASA or give up 1.83% of portfolio value over 90 days.

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

Mowi ASA  vs.  GrainCorp Limited

Mowi ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mowi ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mowi ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GrainCorp Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GrainCorp Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Mowi ASA and GrainCorp

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

The idea behind Mowi ASA and GrainCorp Limited 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.