Correlation Between EMC2 and MEC

Can any of the company-specific risk be diversified away by investing in both EMC2 and MEC 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 EMC2 and MEC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EMC2 and MEC, you can compare the effects of market volatilities on EMC2 and MEC 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 EMC2 with a short position of MEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMC2 and MEC.

Diversification Opportunities for EMC2 and MEC

0.0

Correlation Coefficient

EMC2  MEC

Pay attention - limited upside

The 3 months correlation between EMC2 and MEC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EMC2 and MEC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEC and EMC2 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 EMC2 are associated (or correlated) with MEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEC has no effect on the direction of EMC2 i.e., EMC2 and MEC go up and down completely randomly.

Pair Corralation between EMC2 and MEC

If you would invest  0.05  in EMC2 on December 29, 2024 and sell it today you would lose  0.00  from holding EMC2 or give up 0.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

EMC2  vs.  MEC

EMC2

Risk-Adjusted Performance

Weak

Over the last 90 days EMC2 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, EMC2 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

MEC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with EMC2 and MEC

The main advantage of trading using opposite EMC2 and MEC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMC2 position performs unexpectedly, MEC 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 MEC will offset losses from the drop in MEC's long position.

The idea behind EMC2 and MEC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.