Correlation Between Mantle and HOT
Can any of the company-specific risk be diversified away by investing in both Mantle and HOT 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 HOT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mantle and HOT, you can compare the effects of market volatilities on Mantle and HOT 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 HOT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mantle and HOT.
Diversification Opportunities for Mantle and HOT
Almost no diversification
The 3 months correlation between Mantle and HOT is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Mantle and HOT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOT 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 HOT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOT has no effect on the direction of Mantle i.e., Mantle and HOT go up and down completely randomly.
Pair Corralation between Mantle and HOT
Assuming the 90 days trading horizon Mantle is expected to generate 1.65 times less return on investment than HOT. But when comparing it to its historical volatility, Mantle is 1.23 times less risky than HOT. It trades about 0.14 of its potential returns per unit of risk. HOT is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 0.16 in HOT on August 30, 2024 and sell it today you would earn a total of 0.13 from holding HOT or generate 80.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mantle vs. HOT
Performance |
| Timeline |
| Mantle |
| HOT |
Mantle and HOT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mantle and HOT
The main advantage of trading using opposite Mantle and HOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mantle position performs unexpectedly, HOT 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 HOT will offset losses from the drop in HOT's long position.The idea behind Mantle and HOT 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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