Correlation Between MFC Industrial and Platinum

Can any of the company-specific risk be diversified away by investing in both MFC Industrial and Platinum 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 Platinum 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 The Platinum Group, you can compare the effects of market volatilities on MFC Industrial and Platinum 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 Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFC Industrial and Platinum.

Diversification Opportunities for MFC Industrial and Platinum

0.23

Correlation Coefficient

MFC Industrial  Platinum

Modest diversification

The 3 months correlation between MFC and Platinum is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding MFC Industrial Investment and The Platinum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Group 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 Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Group has no effect on the direction of MFC Industrial i.e., MFC Industrial and Platinum go up and down completely randomly.

Pair Corralation between MFC Industrial and Platinum

Assuming the 90 days trading horizon MFC Industrial is expected to generate 75.01 times less return on investment than Platinum. But when comparing it to its historical volatility, MFC Industrial Investment is 129.69 times less risky than Platinum. It trades about 0.22 of its potential returns per unit of risk. The Platinum Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.00  in The Platinum Group on September 3, 2024 and sell it today you would earn a total of  232.00  from holding The Platinum Group or generate 9.223372036854776E16% 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.  The Platinum Group

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.

Platinum Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Platinum Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Platinum disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MFC Industrial and Platinum

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

The idea behind MFC Industrial Investment and The Platinum Group 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.