Correlation Between MCAN Mortgage and Doman Building

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

By analyzing existing cross correlation between MCAN Mortgage and Doman Building Materials, you can compare the effects of market volatilities on MCAN Mortgage and Doman Building 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 MCAN Mortgage with a short position of Doman Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCAN Mortgage and Doman Building.

Diversification Opportunities for MCAN Mortgage and Doman Building

0.4

Correlation Coefficient

MCAN Mortgage  Doman Building

Very weak diversification

The 3 months correlation between MCAN and Doman is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding MCAN Mortgage and Doman Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doman Building Materials and MCAN Mortgage 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 MCAN Mortgage are associated (or correlated) with Doman Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doman Building Materials has no effect on the direction of MCAN Mortgage i.e., MCAN Mortgage and Doman Building go up and down completely randomly.

Pair Corralation between MCAN Mortgage and Doman Building

Assuming the 90 days trading horizon MCAN Mortgage is expected to generate 0.61 times more return on investment than Doman Building. However, MCAN Mortgage is 1.64 times less risky than Doman Building. It trades about -0.03 of its potential returns per unit of risk. Doman Building Materials is currently generating about -0.32 per unit of risk. If you would invest  1,916  in MCAN Mortgage on December 3, 2024 and sell it today you would lose (46.00) from holding MCAN Mortgage or give up 2.4% of portfolio value over 90 days.

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

MCAN Mortgage  vs.  Doman Building Materials

MCAN Mortgage

Risk-Adjusted Performance

Very Weak

Over the last 90 days MCAN Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, MCAN Mortgage is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Doman Building Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Doman Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with MCAN Mortgage and Doman Building

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

The idea behind MCAN Mortgage and Doman Building Materials 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.