Correlation Between Molson Coors and Nextracker

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

By analyzing existing cross correlation between Molson Coors Brewing and Nextracker Class A, you can compare the effects of market volatilities on Molson Coors and Nextracker 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 Molson Coors with a short position of Nextracker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and Nextracker.

Diversification Opportunities for Molson Coors and Nextracker

0.3

Correlation Coefficient

Molson Coors  Nextracker

Weak diversification

The 3 months correlation between Molson and Nextracker is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Brewing and Nextracker Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextracker Class A and Molson Coors 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 Molson Coors Brewing are associated (or correlated) with Nextracker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextracker Class A has no effect on the direction of Molson Coors i.e., Molson Coors and Nextracker go up and down completely randomly.

Pair Corralation between Molson Coors and Nextracker

Considering the 90-day investment horizon Molson Coors is expected to generate 1.85 times less return on investment than Nextracker. But when comparing it to its historical volatility, Molson Coors Brewing is 2.73 times less risky than Nextracker. It trades about 0.02 of its potential returns per unit of risk. Nextracker Class A is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,611  in Nextracker Class A on September 17, 2024 and sell it today you would lose (59.50) from holding Nextracker Class A or give up 1.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.66%
Values	Daily Returns

Molson Coors Brewing  vs.  Nextracker Class A

Molson Coors Brewing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nextracker Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextracker Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nextracker is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Molson Coors and Nextracker

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

The idea behind Molson Coors Brewing and Nextracker Class A 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.