Correlation Between MClean Technologies and Central Industrial

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

By analyzing existing cross correlation between MClean Technologies Bhd and Central Industrial Corp, you can compare the effects of market volatilities on MClean Technologies and Central Industrial 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 MClean Technologies with a short position of Central Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of MClean Technologies and Central Industrial.

Diversification Opportunities for MClean Technologies and Central Industrial

0.09

Correlation Coefficient

MClean Technologies  Central Industrial

Significant diversification

The 3 months correlation between MClean and Central is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding MClean Technologies Bhd and Central Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Industrial Corp and MClean Technologies 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 MClean Technologies Bhd are associated (or correlated) with Central Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Industrial Corp has no effect on the direction of MClean Technologies i.e., MClean Technologies and Central Industrial go up and down completely randomly.

Pair Corralation between MClean Technologies and Central Industrial

Assuming the 90 days trading horizon MClean Technologies Bhd is expected to generate 6.17 times more return on investment than Central Industrial. However, MClean Technologies is 6.17 times more volatile than Central Industrial Corp. It trades about 0.06 of its potential returns per unit of risk. Central Industrial Corp is currently generating about 0.19 per unit of risk. If you would invest  26.00  in MClean Technologies Bhd on September 4, 2024 and sell it today you would earn a total of  1.00  from holding MClean Technologies Bhd or generate 3.85% return on investment over 90 days.

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

MClean Technologies Bhd  vs.  Central Industrial Corp

MClean Technologies Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MClean Technologies Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, MClean Technologies is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Central Industrial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Central Industrial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MClean Technologies and Central Industrial

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

The idea behind MClean Technologies Bhd and Central Industrial Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.