Correlation Between Shopify and MITIE GROUP

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

Diversification Opportunities for Shopify and MITIE GROUP

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Shopify and MITIE is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and MITIE GROUP PLC ORD 2 5P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITIE GROUP PLC and Shopify 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 Shopify are associated (or correlated) with MITIE GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITIE GROUP PLC has no effect on the direction of Shopify i.e., Shopify and MITIE GROUP go up and down completely randomly.

Pair Corralation between Shopify and MITIE GROUP

Given the investment horizon of 90 days Shopify is expected to generate 1.93 times more return on investment than MITIE GROUP. However, Shopify is 1.93 times more volatile than MITIE GROUP PLC. It trades about 0.05 of its potential returns per unit of risk. MITIE GROUP PLC is currently generating about -0.18 per unit of risk. If you would invest  2,984  in Shopify on July 7, 2022 and sell it today you would earn a total of  99.00  from holding Shopify or generate 3.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Shopify  vs.  MITIE GROUP PLC ORD 2 5P

 Performance (%) 
       Timeline  
Shopify 
Shopify Performance
0 of 100
Over the last 90 days Shopify has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Shopify is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

Shopify Price Channel

MITIE GROUP PLC 
MITIE Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in MITIE GROUP PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish basic indicators, MITIE GROUP revealed solid returns over the last few months and may actually be approaching a breakup point.

MITIE Price Channel

Shopify and MITIE GROUP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shopify and MITIE GROUP

The main advantage of trading using opposite Shopify and MITIE GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shopify position performs unexpectedly, MITIE GROUP 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 MITIE GROUP will offset losses from the drop in MITIE GROUP's long position.
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The idea behind Shopify and MITIE GROUP PLC 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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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 Transaction History module to view history of all your transactions and understand their impact on performance.

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