Correlation Between Masco Corp and Empire Metals
Can any of the company-specific risk be diversified away by investing in both Masco Corp and Empire Metals 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 Masco Corp and Empire Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Masco Corp and Empire Metals Limited, you can compare the effects of market volatilities on Masco Corp and Empire Metals 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 Masco Corp with a short position of Empire Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masco Corp and Empire Metals.
Diversification Opportunities for Masco Corp and Empire Metals
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Masco and Empire is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Masco Corp and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited and Masco Corp 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 Masco Corp are associated (or correlated) with Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Masco Corp i.e., Masco Corp and Empire Metals go up and down completely randomly.
Pair Corralation between Masco Corp and Empire Metals
Assuming the 90 days trading horizon Masco Corp is expected to generate 4.44 times less return on investment than Empire Metals. But when comparing it to its historical volatility, Masco Corp is 3.38 times less risky than Empire Metals. It trades about 0.06 of its potential returns per unit of risk. Empire Metals Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 174.00 in Empire Metals Limited on October 9, 2024 and sell it today you would earn a total of 541.00 from holding Empire Metals Limited or generate 310.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.16% |
| Values | Daily Returns |
Masco Corp vs. Empire Metals Limited
Performance |
| Timeline |
| Masco Corp |
| Empire Metals Limited |
Masco Corp and Empire Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Masco Corp and Empire Metals
The main advantage of trading using opposite Masco Corp and Empire Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masco Corp position performs unexpectedly, Empire Metals 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 Empire Metals will offset losses from the drop in Empire Metals' long position.| Masco Corp vs. Walmart | Masco Corp vs. BYD Co | Masco Corp vs. Volkswagen AG | Masco Corp vs. Volkswagen AG Non Vtg |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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