Correlation Between MSP Recovery and Hooker Furniture

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

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

Diversification Opportunities for MSP Recovery and Hooker Furniture

-0.5

Correlation Coefficient

MSP Recovery  Hooker Furniture

Very good diversification

The 3 months correlation between MSP and Hooker is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding MSP Recovery and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture and MSP Recovery 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 MSP Recovery are associated (or correlated) with Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of MSP Recovery i.e., MSP Recovery and Hooker Furniture go up and down completely randomly.

Pair Corralation between MSP Recovery and Hooker Furniture

Assuming the 90 days horizon MSP Recovery is expected to generate 50.3 times more return on investment than Hooker Furniture. However, MSP Recovery is 50.3 times more volatile than Hooker Furniture. It trades about 0.14 of its potential returns per unit of risk. Hooker Furniture is currently generating about 0.01 per unit of risk. If you would invest  3.30  in MSP Recovery on September 6, 2024 and sell it today you would lose (3.12) from holding MSP Recovery or give up 94.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.69%
Values	Daily Returns

MSP Recovery  vs.  Hooker Furniture

MSP Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSP Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, MSP Recovery is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hooker Furniture

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hooker Furniture are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Hooker Furniture unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MSP Recovery and Hooker Furniture

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

The idea behind MSP Recovery and Hooker Furniture 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..