Correlation Between MFC Industrial and SE Education

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

Diversification Opportunities for MFC Industrial and SE Education

-0.43

Correlation Coefficient

MFC Industrial  SE Education

Very good diversification

The 3 months correlation between MFC and SE-ED is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding MFC Industrial Investment and SE Education Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SE Education Public 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 SE Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SE Education Public has no effect on the direction of MFC Industrial i.e., MFC Industrial and SE Education go up and down completely randomly.

Pair Corralation between MFC Industrial and SE Education

Assuming the 90 days trading horizon MFC Industrial Investment is expected to under-perform the SE Education. But the stock apears to be less risky and, when comparing its historical volatility, MFC Industrial Investment is 9.71 times less risky than SE Education. The stock trades about -0.04 of its potential returns per unit of risk. The SE Education Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  226.00  in SE Education Public on October 22, 2024 and sell it today you would lose (22.00) from holding SE Education Public or give up 9.73% of portfolio value over 90 days.

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

MFC Industrial Investment  vs.  SE Education Public

MFC Industrial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFC Industrial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

SE Education Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SE Education Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, SE Education is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MFC Industrial and SE Education

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

The idea behind MFC Industrial Investment and SE Education Public 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 Directory module to find actively traded commodities issued by global exchanges.