Correlation Between MNW and CEL

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

By analyzing existing cross correlation between MNW and CEL, you can compare the effects of market volatilities on MNW and CEL 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 MNW with a short position of CEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of MNW and CEL.

Diversification Opportunities for MNW and CEL

0.68

Correlation Coefficient

MNW  CEL

Poor diversification

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

Pair Corralation between MNW and CEL

Assuming the 90 days trading horizon MNW is expected to generate 0.66 times more return on investment than CEL. However, MNW is 1.52 times less risky than CEL. It trades about -0.16 of its potential returns per unit of risk. CEL is currently generating about -0.4 per unit of risk. If you would invest  117.00  in MNW on January 29, 2024 and sell it today you would lose (25.00) from holding MNW or give up 21.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

MNW  vs.  CEL

MNW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MNW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MNW is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

CEL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady essential indicators, CEL may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with MNW and CEL

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

The idea behind MNW and CEL 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.