Correlation Between Big Time and MTL
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By analyzing existing cross correlation between Big Time and MTL, you can compare the effects of market volatilities on Big Time 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 Big Time with a short position of MTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Time and MTL.
Diversification Opportunities for Big Time and MTL
Poor diversification
The 3 months correlation between Big and MTL is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Big Time and MTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTL and Big Time 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 Big Time 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 Big Time i.e., Big Time and MTL go up and down completely randomly.
Pair Corralation between Big Time and MTL
Assuming the 90 days trading horizon Big Time is expected to under-perform the MTL. In addition to that, Big Time is 1.25 times more volatile than MTL. It trades about -0.44 of its total potential returns per unit of risk. MTL is currently generating about -0.4 per unit of volatility. If you would invest 147.00 in MTL on November 9, 2024 and sell it today you would lose (59.00) from holding MTL or give up 40.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big Time vs. MTL
Performance |
| Timeline |
| Big Time |
| MTL |
Big Time and MTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Time and MTL
The main advantage of trading using opposite Big Time and MTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Time 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 Big Time 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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