Correlation Between First State and MCF Energy

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

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

Diversification Opportunities for First State and MCF Energy

-0.73

Correlation Coefficient

First State  MCF Energy

Pay attention - limited upside

The 3 months correlation between First and MCF is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding First State Financial and MCF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCF Energy and First State 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 First State Financial are associated (or correlated) with MCF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCF Energy has no effect on the direction of First State i.e., First State and MCF Energy go up and down completely randomly.

Pair Corralation between First State and MCF Energy

If you would invest  4.47  in First State Financial on September 12, 2024 and sell it today you would earn a total of  0.00  from holding First State Financial or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

First State Financial  vs.  MCF Energy

First State Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First State Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First State is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

MCF Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCF Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with First State and MCF Energy

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

The idea behind First State Financial and MCF Energy 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.

Check out your portfolio center.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.