Correlation Between Crown Seal and MFC Industrial

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

By analyzing existing cross correlation between Crown Seal Public and MFC Industrial Investment, you can compare the effects of market volatilities on Crown Seal and MFC 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 Crown Seal with a short position of MFC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Seal and MFC Industrial.

Diversification Opportunities for Crown Seal and MFC Industrial

0.26

Correlation Coefficient

Crown Seal  MFC Industrial

Modest diversification

The 3 months correlation between Crown and MFC is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Crown Seal Public and MFC Industrial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFC Industrial Investment and Crown Seal 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 Crown Seal Public are associated (or correlated) with MFC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFC Industrial Investment has no effect on the direction of Crown Seal i.e., Crown Seal and MFC Industrial go up and down completely randomly.

Pair Corralation between Crown Seal and MFC Industrial

Assuming the 90 days trading horizon Crown Seal Public is expected to generate 129.68 times more return on investment than MFC Industrial. However, Crown Seal is 129.68 times more volatile than MFC Industrial Investment. It trades about 0.13 of its potential returns per unit of risk. MFC Industrial Investment is currently generating about 0.22 per unit of risk. If you would invest  0.00  in Crown Seal Public on September 3, 2024 and sell it today you would earn a total of  4,600  from holding Crown Seal Public or generate 9.223372036854776E16% return on investment over 90 days.

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

Crown Seal Public  vs.  MFC Industrial Investment

Crown Seal Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Seal Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Crown Seal disclosed solid returns over the last few months and may actually be approaching a breakup point.

MFC Industrial Investment

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MFC Industrial Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, MFC Industrial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crown Seal and MFC Industrial

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

The idea behind Crown Seal Public and MFC Industrial Investment 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.