Correlation Between MCBC Holdings and PACCAR

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

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

Diversification Opportunities for MCBC Holdings and PACCAR

0.68

Correlation Coefficient

MCBC Holdings  PACCAR

Poor diversification

The 3 months correlation between MCBC and PACCAR is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MCBC Holdings and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of MCBC Holdings i.e., MCBC Holdings and PACCAR go up and down completely randomly.

Pair Corralation between MCBC Holdings and PACCAR

Given the investment horizon of 90 days MCBC Holdings is expected to under-perform the PACCAR. In addition to that, MCBC Holdings is 1.98 times more volatile than PACCAR Inc. It trades about -0.18 of its total potential returns per unit of risk. PACCAR Inc is currently generating about -0.28 per unit of volatility. If you would invest  12,145  in PACCAR Inc on January 20, 2024 and sell it today you would lose (769.00) from holding PACCAR Inc or give up 6.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

MCBC Holdings  vs.  PACCAR Inc

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.

PACCAR Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MCBC Holdings and PACCAR

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

The idea behind MCBC Holdings and PACCAR Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.