Correlation Between MFC Industrial and Information

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

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

Diversification Opportunities for MFC Industrial and Information

0.32

Correlation Coefficient

MFC Industrial  Information

Weak diversification

The 3 months correlation between MFC and Information is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding MFC Industrial Investment and Information and Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information and Comm and MFC Industrial 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 MFC Industrial Investment are associated (or correlated) with Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information and Comm has no effect on the direction of MFC Industrial i.e., MFC Industrial and Information go up and down completely randomly.

Pair Corralation between MFC Industrial and Information

Assuming the 90 days trading horizon MFC Industrial Investment is expected to generate 0.41 times more return on investment than Information. However, MFC Industrial Investment is 2.45 times less risky than Information. It trades about 0.22 of its potential returns per unit of risk. Information and Communication is currently generating about 0.06 per unit of risk. If you would invest  557.00  in MFC Industrial Investment on September 3, 2024 and sell it today you would earn a total of  78.00  from holding MFC Industrial Investment or generate 14.0% return on investment over 90 days.

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

MFC Industrial Investment  vs.  Information and Communication

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.

Information and Comm

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Information and Communication are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Information may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MFC Industrial and Information

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

The idea behind MFC Industrial Investment and Information and Communication 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.