Correlation Between True USD and MCO
Can any of the company-specific risk be diversified away by investing in both True USD and MCO 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 True USD and MCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between True USD and MCO, you can compare the effects of market volatilities on True USD and MCO 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 True USD with a short position of MCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of True USD and MCO.
Diversification Opportunities for True USD and MCO
Significant diversification
The 3 months correlation between True and MCO is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding True USD and MCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCO and True USD 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 True USD are associated (or correlated) with MCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCO has no effect on the direction of True USD i.e., True USD and MCO go up and down completely randomly.
Pair Corralation between True USD and MCO
Assuming the 90 days trading horizon True USD is expected to generate 463.86 times less return on investment than MCO. But when comparing it to its historical volatility, True USD is 189.68 times less risky than MCO. It trades about 0.06 of its potential returns per unit of risk. MCO is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 85.00 in MCO on January 20, 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
True USD vs. MCO
Performance |
| Timeline |
| True USD |
| MCO |
True USD and MCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with True USD and MCO
The main advantage of trading using opposite True USD and MCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if True USD position performs unexpectedly, MCO 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 MCO will offset losses from the drop in MCO's long position.The idea behind True USD and MCO 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |