Correlation Between Energy Focu and MasterBrand

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

By analyzing existing cross correlation between Energy Focu and MasterBrand, you can compare the effects of market volatilities on Energy Focu and MasterBrand 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 Energy Focu with a short position of MasterBrand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Focu and MasterBrand.

Diversification Opportunities for Energy Focu and MasterBrand

-0.64

Correlation Coefficient

Energy Focu  MasterBrand

Excellent diversification

The 3 months correlation between Energy and MasterBrand is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Energy Focu and MasterBrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MasterBrand and Energy Focu 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 Energy Focu are associated (or correlated) with MasterBrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MasterBrand has no effect on the direction of Energy Focu i.e., Energy Focu and MasterBrand go up and down completely randomly.

Pair Corralation between Energy Focu and MasterBrand

Given the investment horizon of 90 days Energy Focu is expected to generate 1.27 times less return on investment than MasterBrand. In addition to that, Energy Focu is 2.56 times more volatile than MasterBrand. It trades about 0.03 of its total potential returns per unit of risk. MasterBrand is currently generating about 0.09 per unit of volatility. If you would invest  1,553  in MasterBrand on August 31, 2024 and sell it today you would earn a total of  165.00  from holding MasterBrand or generate 10.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Energy Focu  vs.  MasterBrand

Energy Focu

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Focu are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Energy Focu may actually be approaching a critical reversion point that can send shares even higher in December 2024.

MasterBrand

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MasterBrand are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, MasterBrand may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Energy Focu and MasterBrand

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

The idea behind Energy Focu and MasterBrand 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.