Correlation Between REC Silicon and MPC Container

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

By analyzing existing cross correlation between REC Silicon ASA and MPC Container Ships, you can compare the effects of market volatilities on REC Silicon and MPC Container 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 REC Silicon with a short position of MPC Container. Check out your portfolio center. Please also check ongoing floating volatility patterns of REC Silicon and MPC Container.

Diversification Opportunities for REC Silicon and MPC Container

0.68

Correlation Coefficient

REC Silicon  MPC Container

Poor diversification

The 3 months correlation between REC and MPC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding REC Silicon ASA and MPC Container Ships in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPC Container Ships and REC Silicon 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 REC Silicon ASA are associated (or correlated) with MPC Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPC Container Ships has no effect on the direction of REC Silicon i.e., REC Silicon and MPC Container go up and down completely randomly.

Pair Corralation between REC Silicon and MPC Container

Assuming the 90 days trading horizon REC Silicon ASA is expected to under-perform the MPC Container. In addition to that, REC Silicon is 2.01 times more volatile than MPC Container Ships. It trades about -0.06 of its total potential returns per unit of risk. MPC Container Ships is currently generating about 0.05 per unit of volatility. If you would invest  1,181  in MPC Container Ships on November 20, 2024 and sell it today you would earn a total of  671.00  from holding MPC Container Ships or generate 56.82% return on investment over 90 days.

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

REC Silicon ASA  vs.  MPC Container Ships

REC Silicon ASA

Risk-Adjusted Performance

Very Weak

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

MPC Container Ships

Risk-Adjusted Performance

Very Weak

Over the last 90 days MPC Container Ships has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with REC Silicon and MPC Container

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

The idea behind REC Silicon ASA and MPC Container Ships 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.