Correlation Between SOI Old and MRC Global

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

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

Diversification Opportunities for SOI Old and MRC Global

0.56

Correlation Coefficient

SOI Old  MRC Global

Very weak diversification

The 3 months correlation between SOI and MRC is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SOI Old and MRC Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRC Global and SOI Old 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 SOI Old are associated (or correlated) with MRC Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRC Global has no effect on the direction of SOI Old i.e., SOI Old and MRC Global go up and down completely randomly.

Pair Corralation between SOI Old and MRC Global

If you would invest  1,274  in MRC Global on October 23, 2024 and sell it today you would earn a total of  211.00  from holding MRC Global or generate 16.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	5.26%
Values	Daily Returns

SOI Old  vs.  MRC Global

SOI Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, SOI Old is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

MRC Global

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with SOI Old and MRC Global

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

The idea behind SOI Old and MRC Global 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.