Correlation Between MFC Industrial and Advanced Information

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

By analyzing existing cross correlation between MFC Industrial Real and Advanced Information Technology, you can compare the effects of market volatilities on MFC Industrial and Advanced 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 Advanced Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFC Industrial and Advanced Information.

Diversification Opportunities for MFC Industrial and Advanced Information

-0.14

Correlation Coefficient

MFC Industrial  Advanced Information

Good diversification

The 3 months correlation between MFC and Advanced is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding MFC Industrial Real and Advanced Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Information 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 Real are associated (or correlated) with Advanced Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Information has no effect on the direction of MFC Industrial i.e., MFC Industrial and Advanced Information go up and down completely randomly.

Pair Corralation between MFC Industrial and Advanced Information

Assuming the 90 days trading horizon MFC Industrial Real is expected to generate 2.52 times more return on investment than Advanced Information. However, MFC Industrial is 2.52 times more volatile than Advanced Information Technology. It trades about 0.06 of its potential returns per unit of risk. Advanced Information Technology is currently generating about 0.11 per unit of risk. If you would invest  30.00  in MFC Industrial Real on December 29, 2024 and sell it today you would earn a total of  3.00  from holding MFC Industrial Real or generate 10.0% return on investment over 90 days.

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

MFC Industrial Real  vs.  Advanced Information Technolog

MFC Industrial Real

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MFC Industrial Real are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, MFC Industrial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Advanced Information

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Information Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Advanced Information disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MFC Industrial and Advanced Information

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

The idea behind MFC Industrial Real and Advanced Information Technology 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.