Correlation Between New Tech and MBank SA

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

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

Diversification Opportunities for New Tech and MBank SA

0.81

Correlation Coefficient

New Tech  MBank SA

Very poor diversification

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

Pair Corralation between New Tech and MBank SA

Assuming the 90 days trading horizon New Tech Capital is expected to under-perform the MBank SA. In addition to that, New Tech is 2.83 times more volatile than mBank SA. It trades about -0.16 of its total potential returns per unit of risk. mBank SA is currently generating about -0.08 per unit of volatility. 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

New Tech Capital  vs.  mBank SA

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.

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.

Pair Trading with New Tech and MBank SA

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

The idea behind New Tech Capital and mBank 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.