Correlation Between MC Mining and Brimstone Investment

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

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

Diversification Opportunities for MC Mining and Brimstone Investment

0.52

Correlation Coefficient

MC Mining  Brimstone Investment

Very weak diversification

The 3 months correlation between MCZ and Brimstone is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MC Mining and Brimstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brimstone Investment and MC Mining 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 MC Mining are associated (or correlated) with Brimstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brimstone Investment has no effect on the direction of MC Mining i.e., MC Mining and Brimstone Investment go up and down completely randomly.

Pair Corralation between MC Mining and Brimstone Investment

Assuming the 90 days trading horizon MC Mining is expected to under-perform the Brimstone Investment. But the stock apears to be less risky and, when comparing its historical volatility, MC Mining is 1.39 times less risky than Brimstone Investment. The stock trades about -0.08 of its potential returns per unit of risk. The Brimstone Investment is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  57,000  in Brimstone Investment on September 13, 2024 and sell it today you would lose (6,600) from holding Brimstone Investment or give up 11.58% of portfolio value over 90 days.

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

MC Mining  vs.  Brimstone Investment

MC Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MC Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Brimstone Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brimstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Brimstone Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MC Mining and Brimstone Investment

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

The idea behind MC Mining and Brimstone Investment 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.