Correlation Between Bri Chem and MRC Global

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

By analyzing existing cross correlation between Bri Chem Corp and MRC Global, you can compare the effects of market volatilities on Bri Chem and MRC Global 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 Bri Chem with a short position of MRC Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bri Chem and MRC Global.

Diversification Opportunities for Bri Chem and MRC Global

0.2

Correlation Coefficient

Bri Chem  MRC Global

Modest diversification

The 3 months correlation between Bri and MRC is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bri Chem Corp and MRC Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRC Global and Bri Chem 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 Bri Chem Corp are associated (or correlated) with MRC Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRC Global has no effect on the direction of Bri Chem i.e., Bri Chem and MRC Global go up and down completely randomly.

Pair Corralation between Bri Chem and MRC Global

Assuming the 90 days horizon Bri Chem Corp is expected to generate 3.22 times more return on investment than MRC Global. However, Bri Chem is 3.22 times more volatile than MRC Global. It trades about 0.04 of its potential returns per unit of risk. MRC Global is currently generating about -0.03 per unit of risk. If you would invest  24.00  in Bri Chem Corp on December 26, 2024 and sell it today you would earn a total of  0.00  from holding Bri Chem Corp or generate 0.0% return on investment over 90 days.

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

Bri Chem Corp  vs.  MRC Global

Bri Chem Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Bri Chem reported solid returns over the last few months and may actually be approaching a breakup point.

MRC Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days MRC Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MRC Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bri Chem and MRC Global

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

The idea behind Bri Chem Corp and MRC Global 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.