Correlation Between Cars and MCBC Holdings

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

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

Diversification Opportunities for Cars and MCBC Holdings

-0.17

Correlation Coefficient

Cars  MCBC Holdings

Good diversification

The 3 months correlation between Cars and MCBC is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and MCBC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCBC Holdings and Cars 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 Cars Inc are associated (or correlated) with MCBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCBC Holdings has no effect on the direction of Cars i.e., Cars and MCBC Holdings go up and down completely randomly.

Pair Corralation between Cars and MCBC Holdings

Given the investment horizon of 90 days Cars Inc is expected to generate 0.72 times more return on investment than MCBC Holdings. However, Cars Inc is 1.39 times less risky than MCBC Holdings. It trades about -0.12 of its potential returns per unit of risk. MCBC Holdings is currently generating about -0.17 per unit of risk. If you would invest  1,718  in Cars Inc on January 21, 2024 and sell it today you would lose (74.00) from holding Cars Inc or give up 4.31% of portfolio value over 90 days.

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

Cars Inc  vs.  MCBC Holdings

Cars Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

MCBC Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCBC Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, MCBC Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cars and MCBC Holdings

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

The idea behind Cars Inc and MCBC Holdings 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..