Correlation Between North American and MRC Global
Can any of the company-specific risk be diversified away by investing in both North American and MRC Global 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 North American and MRC Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and MRC Global, you can compare the effects of market volatilities on North American and MRC Global 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 North American with a short position of MRC Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and MRC Global.
Diversification Opportunities for North American and MRC Global
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between North and MRC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and MRC Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRC Global and North American 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 North American Construction are associated (or correlated) with MRC Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRC Global has no effect on the direction of North American i.e., North American and MRC Global go up and down completely randomly.
Pair Corralation between North American and MRC Global
Considering the 90-day investment horizon North American Construction is expected to generate 0.91 times more return on investment than MRC Global. However, North American Construction is 1.1 times less risky than MRC Global. It trades about 0.22 of its potential returns per unit of risk. MRC Global is currently generating about 0.18 per unit of risk. If you would invest 1,701 in North American Construction on August 24, 2024 and sell it today you would earn a total of 273.00 from holding North American Construction or generate 16.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. MRC Global
Performance |
| Timeline |
| North American Const |
| MRC Global |
North American and MRC Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and MRC Global
The main advantage of trading using opposite North American and MRC Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, MRC Global 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 MRC Global will offset losses from the drop in MRC Global's long position.| North American vs. Geospace Technologies | North American vs. MRC Global | North American vs. Natural Gas Services | North American vs. Now Inc |
| MRC Global vs. NOV Inc | MRC Global vs. Ranger Energy Services | MRC Global vs. Oil States International | MRC Global vs. Geospace Technologies |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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