Correlation Between McPhy Energy and ABB
Can any of the company-specific risk be diversified away by investing in both McPhy Energy and ABB 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 McPhy Energy and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McPhy Energy SA and ABB, you can compare the effects of market volatilities on McPhy Energy and ABB 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 McPhy Energy with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of McPhy Energy and ABB.
Diversification Opportunities for McPhy Energy and ABB
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McPhy and ABB is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding McPhy Energy SA and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and McPhy Energy 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 McPhy Energy SA are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of McPhy Energy i.e., McPhy Energy and ABB go up and down completely randomly.
Pair Corralation between McPhy Energy and ABB
Assuming the 90 days horizon McPhy Energy SA is expected to under-perform the ABB. In addition to that, McPhy Energy is 1.89 times more volatile than ABB. It trades about -0.19 of its total potential returns per unit of risk. ABB is currently generating about 0.04 per unit of volatility. If you would invest 5,000 in ABB on September 3, 2024 and sell it today you would earn a total of 450.00 from holding ABB or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McPhy Energy SA vs. ABB
Performance |
| Timeline |
| McPhy Energy SA |
| ABB |
McPhy Energy and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McPhy Energy and ABB
The main advantage of trading using opposite McPhy Energy and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McPhy Energy position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.| McPhy Energy vs. MEDICAL FACILITIES NEW | McPhy Energy vs. Computershare Limited | McPhy Energy vs. Consolidated Communications Holdings | McPhy Energy vs. INTERSHOP Communications Aktiengesellschaft |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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