Correlation Between MCBC Holdings and Forza X1

Can any of the company-specific risk be diversified away by investing in both MCBC Holdings and Forza X1 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 MCBC Holdings and Forza X1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MCBC Holdings and Forza X1, you can compare the effects of market volatilities on MCBC Holdings and Forza X1 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 MCBC Holdings with a short position of Forza X1. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCBC Holdings and Forza X1.

Diversification Opportunities for MCBC Holdings and Forza X1

0.15

Correlation Coefficient

MCBC Holdings  Forza X1

Average diversification

The 3 months correlation between MCBC and Forza is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding MCBC Holdings and Forza X1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forza X1 and MCBC Holdings 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 MCBC Holdings are associated (or correlated) with Forza X1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forza X1 has no effect on the direction of MCBC Holdings i.e., MCBC Holdings and Forza X1 go up and down completely randomly.

Pair Corralation between MCBC Holdings and Forza X1

Given the investment horizon of 90 days MCBC Holdings is expected to generate 1.61 times less return on investment than Forza X1. But when comparing it to its historical volatility, MCBC Holdings is 2.65 times less risky than Forza X1. It trades about 0.1 of its potential returns per unit of risk. Forza X1 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Forza X1 on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Forza X1 or generate 4.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	48.44%
Values	Daily Returns

MCBC Holdings  vs.  Forza X1

MCBC Holdings

Risk-Adjusted Performance

7 of 100

OK

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

Forza X1

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Forza X1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unfluctuating basic indicators, Forza X1 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MCBC Holdings and Forza X1

The main advantage of trading using opposite MCBC Holdings and Forza X1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCBC Holdings position performs unexpectedly, Forza X1 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 Forza X1 will offset losses from the drop in Forza X1's long position.

The idea behind MCBC Holdings and Forza X1 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.