Correlation Between MTI WIRELESS and WGHT WTCHER

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Can any of the company-specific risk be diversified away by investing in both MTI WIRELESS and WGHT WTCHER 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 MTI WIRELESS and WGHT WTCHER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTI WIRELESS EDGE and WGHT WTCHER INTL, you can compare the effects of market volatilities on MTI WIRELESS and WGHT WTCHER 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 MTI WIRELESS with a short position of WGHT WTCHER. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTI WIRELESS and WGHT WTCHER.

Diversification Opportunities for MTI WIRELESS and WGHT WTCHER

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between MTI and WGHT is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding MTI WIRELESS EDGE and WGHT WTCHER INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WGHT WTCHER INTL and MTI WIRELESS 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 MTI WIRELESS EDGE are associated (or correlated) with WGHT WTCHER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WGHT WTCHER INTL has no effect on the direction of MTI WIRELESS i.e., MTI WIRELESS and WGHT WTCHER go up and down completely randomly.

Pair Corralation between MTI WIRELESS and WGHT WTCHER

Assuming the 90 days horizon MTI WIRELESS EDGE is expected to generate 0.53 times more return on investment than WGHT WTCHER. However, MTI WIRELESS EDGE is 1.89 times less risky than WGHT WTCHER. It trades about 0.06 of its potential returns per unit of risk. WGHT WTCHER INTL is currently generating about -0.02 per unit of risk. If you would invest  29.00  in MTI WIRELESS EDGE on September 12, 2024 and sell it today you would earn a total of  15.00  from holding MTI WIRELESS EDGE or generate 51.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

MTI WIRELESS EDGE  vs.  WGHT WTCHER INTL

 Performance 
       Timeline  
MTI WIRELESS EDGE 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MTI WIRELESS EDGE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
WGHT WTCHER INTL 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in WGHT WTCHER INTL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, WGHT WTCHER exhibited solid returns over the last few months and may actually be approaching a breakup point.

MTI WIRELESS and WGHT WTCHER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MTI WIRELESS and WGHT WTCHER

The main advantage of trading using opposite MTI WIRELESS and WGHT WTCHER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTI WIRELESS position performs unexpectedly, WGHT WTCHER 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 WGHT WTCHER will offset losses from the drop in WGHT WTCHER's long position.
The idea behind MTI WIRELESS EDGE and WGHT WTCHER INTL 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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