Correlation Between Multi Ways and McGrath RentCorp

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

By analyzing existing cross correlation between Multi Ways Holdings and McGrath RentCorp, you can compare the effects of market volatilities on Multi Ways and McGrath RentCorp 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 Multi Ways with a short position of McGrath RentCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Ways and McGrath RentCorp.

Diversification Opportunities for Multi Ways and McGrath RentCorp

-0.67

Correlation Coefficient

Multi Ways  McGrath RentCorp

Excellent diversification

The 3 months correlation between Multi and McGrath is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Multi Ways Holdings and McGrath RentCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McGrath RentCorp and Multi Ways 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 Multi Ways Holdings are associated (or correlated) with McGrath RentCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McGrath RentCorp has no effect on the direction of Multi Ways i.e., Multi Ways and McGrath RentCorp go up and down completely randomly.

Pair Corralation between Multi Ways and McGrath RentCorp

Considering the 90-day investment horizon Multi Ways Holdings is expected to under-perform the McGrath RentCorp. In addition to that, Multi Ways is 5.42 times more volatile than McGrath RentCorp. It trades about -0.04 of its total potential returns per unit of risk. McGrath RentCorp is currently generating about 0.04 per unit of volatility. If you would invest  9,516  in McGrath RentCorp on September 17, 2024 and sell it today you would earn a total of  2,348  from holding McGrath RentCorp or generate 24.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.69%
Values	Daily Returns

Multi Ways Holdings  vs.  McGrath RentCorp

Multi Ways Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multi Ways Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

McGrath RentCorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McGrath RentCorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, McGrath RentCorp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Multi Ways and McGrath RentCorp

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

The idea behind Multi Ways Holdings and McGrath RentCorp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.