Correlation Between MCO and BTS
Can any of the company-specific risk be diversified away by investing in both MCO and BTS 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 MCO and BTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MCO and BTS, you can compare the effects of market volatilities on MCO and BTS 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 MCO with a short position of BTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCO and BTS.
Diversification Opportunities for MCO and BTS
Significant diversification
The 3 months correlation between MCO and BTS is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MCO and BTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTS and MCO 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 MCO are associated (or correlated) with BTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTS has no effect on the direction of MCO i.e., MCO and BTS go up and down completely randomly.
Pair Corralation between MCO and BTS
Assuming the 90 days trading horizon MCO is expected to generate 0.04 times more return on investment than BTS. However, MCO is 22.83 times less risky than BTS. It trades about 0.13 of its potential returns per unit of risk. BTS is currently generating about -0.07 per unit of risk. If you would invest 84.00 in MCO on February 6, 2024 and sell it today you would earn a total of 1.00 from holding MCO or generate 1.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MCO vs. BTS
Performance |
| Timeline |
| MCO |
| BTS |
MCO and BTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MCO and BTS
The main advantage of trading using opposite MCO and BTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCO position performs unexpectedly, BTS 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 BTS will offset losses from the drop in BTS's long position.The idea behind MCO and BTS 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |