Correlation Between Mantle and AURO
Can any of the company-specific risk be diversified away by investing in both Mantle and AURO 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 Mantle and AURO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mantle and AURO, you can compare the effects of market volatilities on Mantle and AURO 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 Mantle with a short position of AURO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mantle and AURO.
Diversification Opportunities for Mantle and AURO
Very poor diversification
The 3 months correlation between Mantle and AURO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Mantle and AURO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AURO and Mantle 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 Mantle are associated (or correlated) with AURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AURO has no effect on the direction of Mantle i.e., Mantle and AURO go up and down completely randomly.
Pair Corralation between Mantle and AURO
Assuming the 90 days trading horizon Mantle is expected to generate 1.57 times more return on investment than AURO. However, Mantle is 1.57 times more volatile than AURO. It trades about 0.31 of its potential returns per unit of risk. AURO is currently generating about 0.36 per unit of risk. If you would invest 60.00 in Mantle on August 27, 2024 and sell it today you would earn a total of 27.00 from holding Mantle or generate 45.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mantle vs. AURO
Performance |
| Timeline |
| Mantle |
| AURO |
Mantle and AURO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mantle and AURO
The main advantage of trading using opposite Mantle and AURO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mantle position performs unexpectedly, AURO 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 AURO will offset losses from the drop in AURO's long position.The idea behind Mantle and AURO 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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