Correlation Between Marinade and MTL
Can any of the company-specific risk be diversified away by investing in both Marinade and MTL 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 Marinade and MTL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marinade and MTL, you can compare the effects of market volatilities on Marinade and MTL 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 Marinade with a short position of MTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marinade and MTL.
Diversification Opportunities for Marinade and MTL
Very weak diversification
The 3 months correlation between Marinade and MTL is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Marinade and MTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTL and Marinade 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 Marinade are associated (or correlated) with MTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTL has no effect on the direction of Marinade i.e., Marinade and MTL go up and down completely randomly.
Pair Corralation between Marinade and MTL
Assuming the 90 days trading horizon Marinade is expected to under-perform the MTL. In addition to that, Marinade is 1.48 times more volatile than MTL. It trades about -0.14 of its total potential returns per unit of risk. MTL is currently generating about -0.17 per unit of volatility. If you would invest 215.00 in MTL on February 7, 2024 and sell it today you would lose (46.00) from holding MTL or give up 21.4% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Marinade vs. MTL
Performance |
Timeline |
Marinade |
MTL |
Marinade and MTL Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Marinade and MTL
The main advantage of trading using opposite Marinade and MTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marinade position performs unexpectedly, MTL 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 MTL will offset losses from the drop in MTL's long position.The idea behind Marinade and MTL 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |