Correlation Between Luxfer Holdings and MRC Global

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

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

Diversification Opportunities for Luxfer Holdings and MRC Global

0.81

Correlation Coefficient

Luxfer Holdings  MRC Global

Very poor diversification

The 3 months correlation between Luxfer and MRC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC and MRC Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRC Global and Luxfer Holdings 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 Luxfer Holdings PLC are associated (or correlated) with MRC Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRC Global has no effect on the direction of Luxfer Holdings i.e., Luxfer Holdings and MRC Global go up and down completely randomly.

Pair Corralation between Luxfer Holdings and MRC Global

Given the investment horizon of 90 days Luxfer Holdings PLC is expected to generate 1.18 times more return on investment than MRC Global. However, Luxfer Holdings is 1.18 times more volatile than MRC Global. It trades about 0.15 of its potential returns per unit of risk. MRC Global is currently generating about 0.11 per unit of risk. If you would invest  1,104  in Luxfer Holdings PLC on September 12, 2024 and sell it today you would earn a total of  313.00  from holding Luxfer Holdings PLC or generate 28.35% return on investment over 90 days.

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

Luxfer Holdings PLC  vs.  MRC Global

Luxfer Holdings PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

MRC Global

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MRC Global are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, MRC Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Luxfer Holdings and MRC Global

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

The idea behind Luxfer Holdings PLC and MRC Global 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.