Correlation Between Arista Power and MW Investment
Can any of the company-specific risk be diversified away by investing in both Arista Power and MW Investment 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 Arista Power and MW Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arista Power and MW Investment Holding, you can compare the effects of market volatilities on Arista Power and MW Investment 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 Arista Power with a short position of MW Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arista Power and MW Investment.
Diversification Opportunities for Arista Power and MW Investment
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Arista and MEGH is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Arista Power and MW Investment Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MW Investment Holding and Arista Power 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 Arista Power are associated (or correlated) with MW Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MW Investment Holding has no effect on the direction of Arista Power i.e., Arista Power and MW Investment go up and down completely randomly.
Pair Corralation between Arista Power and MW Investment
Given the investment horizon of 90 days Arista Power is expected to generate 13.46 times less return on investment than MW Investment. But when comparing it to its historical volatility, Arista Power is 9.07 times less risky than MW Investment. It trades about 0.02 of its potential returns per unit of risk. MW Investment Holding is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.27 in MW Investment Holding on August 27, 2024 and sell it today you would lose (0.25) from holding MW Investment Holding or give up 92.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arista Power vs. MW Investment Holding
Performance |
| Timeline |
| Arista Power |
| MW Investment Holding |
Arista Power and MW Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arista Power and MW Investment
The main advantage of trading using opposite Arista Power and MW Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arista Power position performs unexpectedly, MW Investment 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 MW Investment will offset losses from the drop in MW Investment's long position.| Arista Power vs. Element Solutions | Arista Power vs. Orion Engineered Carbons | Arista Power vs. Minerals Technologies | Arista Power vs. Ingevity Corp |
| MW Investment vs. Arista Power | MW Investment vs. Atlas Copco AB | MW Investment vs. American Commerce Solutions |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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