Correlation Between Famous Brands and MC Mining

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

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

Diversification Opportunities for Famous Brands and MC Mining

-0.49

Correlation Coefficient

Famous Brands  MC Mining

Very good diversification

The 3 months correlation between Famous and MCZ is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Famous Brands and MC Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MC Mining and Famous Brands 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 Famous Brands are associated (or correlated) with MC Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MC Mining has no effect on the direction of Famous Brands i.e., Famous Brands and MC Mining go up and down completely randomly.

Pair Corralation between Famous Brands and MC Mining

Assuming the 90 days trading horizon Famous Brands is expected to generate 1.68 times less return on investment than MC Mining. But when comparing it to its historical volatility, Famous Brands is 3.0 times less risky than MC Mining. It trades about 0.04 of its potential returns per unit of risk. MC Mining is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17,700  in MC Mining on September 28, 2024 and sell it today you would lose (700.00) from holding MC Mining or give up 3.95% of portfolio value over 90 days.

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

Famous Brands  vs.  MC Mining

Famous Brands

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Famous Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Famous Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MC Mining

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Famous Brands and MC Mining

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

The idea behind Famous Brands and MC Mining 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.