Correlation Between MCO and Maker
Can any of the company-specific risk be diversified away by investing in both MCO and Maker 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 MCO and Maker into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCO and Maker, you can compare the effects of market volatilities on MCO and Maker 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 MCO with a short position of Maker. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCO and Maker.
Diversification Opportunities for MCO and Maker
Significant diversification
The 3 months correlation between MCO and Maker is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MCO and Maker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maker and MCO 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 MCO are associated (or correlated) with Maker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maker has no effect on the direction of MCO i.e., MCO and Maker go up and down completely randomly.
Pair Corralation between MCO and Maker
Assuming the 90 days trading horizon MCO is expected to generate 33.45 times more return on investment than Maker. However, MCO is 33.45 times more volatile than Maker. It trades about 0.21 of its potential returns per unit of risk. Maker is currently generating about -0.07 per unit of risk. If you would invest 84.00 in MCO on January 26, 2024 and sell it today you would earn a total of 1,241 from holding MCO or generate 1477.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 95.65% |
Values | Daily Returns |
MCO vs. Maker
Performance |
Timeline |
MCO |
Maker |
MCO and Maker Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MCO and Maker
The main advantage of trading using opposite MCO and Maker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCO position performs unexpectedly, Maker 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 Maker will offset losses from the drop in Maker's long position.The idea behind MCO and Maker 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
CEOs Directory Screen CEOs from public companies around the world | |
Fundamental Analysis View fundamental data based on most recent published financial statements | |
AI Investment Finder Use AI to screen and filter profitable investment opportunities | |
Content Syndication Quickly integrate customizable finance content to your own investment portal | |
Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |