Correlation Between MGT Capital and XTRA Bitcoin
Can any of the company-specific risk be diversified away by investing in both MGT Capital and XTRA Bitcoin 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 MGT Capital and XTRA Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGT Capital Investments and XTRA Bitcoin, you can compare the effects of market volatilities on MGT Capital and XTRA Bitcoin 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 MGT Capital with a short position of XTRA Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGT Capital and XTRA Bitcoin.
Diversification Opportunities for MGT Capital and XTRA Bitcoin
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between MGT and XTRA is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding MGT Capital Investments and XTRA Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTRA Bitcoin and MGT Capital 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 MGT Capital Investments are associated (or correlated) with XTRA Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTRA Bitcoin has no effect on the direction of MGT Capital i.e., MGT Capital and XTRA Bitcoin go up and down completely randomly.
Pair Corralation between MGT Capital and XTRA Bitcoin
Given the investment horizon of 90 days MGT Capital Investments is expected to generate 1.15 times more return on investment than XTRA Bitcoin. However, MGT Capital is 1.15 times more volatile than XTRA Bitcoin. It trades about 0.05 of its potential returns per unit of risk. XTRA Bitcoin is currently generating about 0.04 per unit of risk. If you would invest 0.70 in MGT Capital Investments on August 30, 2024 and sell it today you would lose (0.10) from holding MGT Capital Investments or give up 14.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 31.11% |
| Values | Daily Returns |
MGT Capital Investments vs. XTRA Bitcoin
Performance |
| Timeline |
| MGT Capital Investments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| XTRA Bitcoin |
MGT Capital and XTRA Bitcoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGT Capital and XTRA Bitcoin
The main advantage of trading using opposite MGT Capital and XTRA Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGT Capital position performs unexpectedly, XTRA Bitcoin 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 XTRA Bitcoin will offset losses from the drop in XTRA Bitcoin's long position.The idea behind MGT Capital Investments and XTRA Bitcoin 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.| XTRA Bitcoin vs. Apple Inc | XTRA Bitcoin vs. Microsoft | XTRA Bitcoin vs. Alphabet Inc Class C | XTRA Bitcoin vs. Meta Platforms |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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