Correlation Between MRC Global and Clorox

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

By analyzing existing cross correlation between MRC Global and The Clorox, you can compare the effects of market volatilities on MRC Global and Clorox 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 MRC Global with a short position of Clorox. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRC Global and Clorox.

Diversification Opportunities for MRC Global and Clorox

0.78

Correlation Coefficient

MRC Global  Clorox

Poor diversification

The 3 months correlation between MRC and Clorox is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MRC Global and The Clorox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clorox and MRC Global 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 MRC Global are associated (or correlated) with Clorox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clorox has no effect on the direction of MRC Global i.e., MRC Global and Clorox go up and down completely randomly.

Pair Corralation between MRC Global and Clorox

Considering the 90-day investment horizon MRC Global is expected to generate 2.31 times more return on investment than Clorox. However, MRC Global is 2.31 times more volatile than The Clorox. It trades about -0.05 of its potential returns per unit of risk. The Clorox is currently generating about -0.17 per unit of risk. If you would invest  1,357  in MRC Global on October 7, 2024 and sell it today you would lose (27.00) from holding MRC Global or give up 1.99% of portfolio value over 90 days.

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

MRC Global  vs.  The Clorox

MRC Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MRC Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, MRC Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Clorox

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Clorox are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Clorox is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MRC Global and Clorox

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

The idea behind MRC Global and The Clorox 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.