Correlation Between MCO and YOU
Can any of the company-specific risk be diversified away by investing in both MCO and YOU 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 YOU into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCO and YOU, you can compare the effects of market volatilities on MCO and YOU 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 YOU. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCO and YOU.
Diversification Opportunities for MCO and YOU
Modest diversification
The 3 months correlation between MCO and YOU is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding MCO and YOU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YOU 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 YOU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YOU has no effect on the direction of MCO i.e., MCO and YOU go up and down completely randomly.
Pair Corralation between MCO and YOU
Assuming the 90 days trading horizon MCO is expected to generate 47.3 times more return on investment than YOU. However, MCO is 47.3 times more volatile than YOU. It trades about 0.21 of its potential returns per unit of risk. YOU is currently generating about 0.09 per unit of risk. If you would invest 85.00 in MCO on January 25, 2024 and sell it today you would earn a total of 1,240 from holding MCO or generate 1458.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
MCO vs. YOU
Performance |
| Timeline |
| MCO |
| YOU |
MCO and YOU Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCO and YOU
The main advantage of trading using opposite MCO and YOU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCO position performs unexpectedly, YOU 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 YOU will offset losses from the drop in YOU's long position.The idea behind MCO and YOU 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |