Correlation Between MCO and Numeraire
Can any of the company-specific risk be diversified away by investing in both MCO and Numeraire 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 Numeraire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCO and Numeraire, you can compare the effects of market volatilities on MCO and Numeraire 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 Numeraire. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCO and Numeraire.
Diversification Opportunities for MCO and Numeraire
Good diversification
The 3 months correlation between MCO and Numeraire is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding MCO and Numeraire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Numeraire 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 Numeraire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Numeraire has no effect on the direction of MCO i.e., MCO and Numeraire go up and down completely randomly.
Pair Corralation between MCO and Numeraire
Assuming the 90 days trading horizon MCO is expected to generate 29.49 times more return on investment than Numeraire. However, MCO is 29.49 times more volatile than Numeraire. It trades about 0.21 of its potential returns per unit of risk. Numeraire is currently generating about -0.19 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 Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
MCO vs. Numeraire
Performance |
| Timeline |
| MCO |
| Numeraire |
MCO and Numeraire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCO and Numeraire
The main advantage of trading using opposite MCO and Numeraire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCO position performs unexpectedly, Numeraire 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 Numeraire will offset losses from the drop in Numeraire's long position.The idea behind MCO and Numeraire 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |