Correlation Between Platinum and MFC Industrial

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

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

Diversification Opportunities for Platinum and MFC Industrial

0.29

Correlation Coefficient

Platinum  MFC Industrial

Modest diversification

The 3 months correlation between Platinum and MFC is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Platinum Group and MFC Industrial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFC Industrial Investment and Platinum 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 The Platinum Group are associated (or correlated) with MFC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFC Industrial Investment has no effect on the direction of Platinum i.e., Platinum and MFC Industrial go up and down completely randomly.

Pair Corralation between Platinum and MFC Industrial

Assuming the 90 days trading horizon The Platinum Group is expected to under-perform the MFC Industrial. In addition to that, Platinum is 4.3 times more volatile than MFC Industrial Investment. It trades about -0.24 of its total potential returns per unit of risk. MFC Industrial Investment is currently generating about -0.08 per unit of volatility. If you would invest  640.00  in MFC Industrial Investment on October 9, 2024 and sell it today you would lose (5.00) from holding MFC Industrial Investment or give up 0.78% of portfolio value over 90 days.

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

The Platinum Group  vs.  MFC Industrial Investment

Platinum Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Platinum Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Platinum is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

MFC Industrial Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MFC Industrial Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, MFC Industrial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Platinum and MFC Industrial

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

The idea behind The Platinum Group and MFC Industrial Investment 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.