Correlation Between MPI and Southeast Cement

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

By analyzing existing cross correlation between MPI Corporation and Southeast Cement Co, you can compare the effects of market volatilities on MPI and Southeast Cement 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 MPI with a short position of Southeast Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPI and Southeast Cement.

Diversification Opportunities for MPI and Southeast Cement

-0.53

Correlation Coefficient

MPI  Southeast Cement

Excellent diversification

The 3 months correlation between MPI and Southeast is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding MPI Corp. and Southeast Cement Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southeast Cement and MPI 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 MPI Corporation are associated (or correlated) with Southeast Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southeast Cement has no effect on the direction of MPI i.e., MPI and Southeast Cement go up and down completely randomly.

Pair Corralation between MPI and Southeast Cement

Assuming the 90 days trading horizon MPI Corporation is expected to generate 2.22 times more return on investment than Southeast Cement. However, MPI is 2.22 times more volatile than Southeast Cement Co. It trades about 0.15 of its potential returns per unit of risk. Southeast Cement Co is currently generating about 0.02 per unit of risk. If you would invest  11,708  in MPI Corporation on October 16, 2024 and sell it today you would earn a total of  77,192  from holding MPI Corporation or generate 659.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

MPI Corp.  vs.  Southeast Cement Co

MPI Corporation

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MPI Corporation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MPI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Southeast Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southeast Cement Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with MPI and Southeast Cement

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

The idea behind MPI Corporation and Southeast Cement Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.