Correlation Between Curtiss Motorcycles and MCBC Holdings

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

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

Diversification Opportunities for Curtiss Motorcycles and MCBC Holdings

0.08

Correlation Coefficient

Curtiss Motorcycles  MCBC Holdings

Significant diversification

The 3 months correlation between Curtiss and MCBC is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Curtiss Motorcycles and MCBC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCBC Holdings and Curtiss Motorcycles 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 Curtiss Motorcycles are associated (or correlated) with MCBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCBC Holdings has no effect on the direction of Curtiss Motorcycles i.e., Curtiss Motorcycles and MCBC Holdings go up and down completely randomly.

Pair Corralation between Curtiss Motorcycles and MCBC Holdings

Given the investment horizon of 90 days Curtiss Motorcycles is expected to generate 44.71 times more return on investment than MCBC Holdings. However, Curtiss Motorcycles is 44.71 times more volatile than MCBC Holdings. It trades about 0.18 of its potential returns per unit of risk. MCBC Holdings is currently generating about 0.06 per unit of risk. If you would invest  4.50  in Curtiss Motorcycles on September 17, 2024 and sell it today you would earn a total of  0.50  from holding Curtiss Motorcycles or generate 11.11% return on investment over 90 days.

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

Curtiss Motorcycles  vs.  MCBC Holdings

Curtiss Motorcycles

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Curtiss Motorcycles are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Curtiss Motorcycles unveiled solid returns over the last few months and may actually be approaching a breakup point.

MCBC Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MCBC Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, MCBC Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Curtiss Motorcycles and MCBC Holdings

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

The idea behind Curtiss Motorcycles and MCBC Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.