Correlation Between BRC and MCF Energy

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

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

Diversification Opportunities for BRC and MCF Energy

-0.46

Correlation Coefficient

BRC  MCF Energy

Very good diversification

The 3 months correlation between BRC and MCF is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding BRC Inc and MCF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCF Energy and BRC 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 BRC Inc are associated (or correlated) with MCF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCF Energy has no effect on the direction of BRC i.e., BRC and MCF Energy go up and down completely randomly.

Pair Corralation between BRC and MCF Energy

Given the investment horizon of 90 days BRC Inc is expected to under-perform the MCF Energy. But the stock apears to be less risky and, when comparing its historical volatility, BRC Inc is 2.3 times less risky than MCF Energy. The stock trades about -0.15 of its potential returns per unit of risk. The MCF Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3.50  in MCF Energy on December 26, 2024 and sell it today you would earn a total of  1.25  from holding MCF Energy or generate 35.71% return on investment over 90 days.

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

BRC Inc  vs.  MCF Energy

BRC Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days BRC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

MCF Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MCF Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, MCF Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BRC and MCF Energy

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

The idea behind BRC Inc and MCF Energy 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.