Correlation Between MLN and GRIN
Can any of the company-specific risk be diversified away by investing in both MLN and GRIN 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 MLN and GRIN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MLN and GRIN, you can compare the effects of market volatilities on MLN and GRIN 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 MLN with a short position of GRIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of MLN and GRIN.
Diversification Opportunities for MLN and GRIN
Very good diversification
The 3 months correlation between MLN and GRIN is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding MLN and GRIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRIN and MLN 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 MLN are associated (or correlated) with GRIN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRIN has no effect on the direction of MLN i.e., MLN and GRIN go up and down completely randomly.
Pair Corralation between MLN and GRIN
Assuming the 90 days trading horizon MLN is expected to generate 8.21 times less return on investment than GRIN. But when comparing it to its historical volatility, MLN is 1.23 times less risky than GRIN. It trades about 0.04 of its potential returns per unit of risk. GRIN is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2.63 in GRIN on August 25, 2024 and sell it today you would earn a total of 0.72 from holding GRIN or generate 27.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MLN vs. GRIN
Performance |
| Timeline |
| MLN |
| GRIN |
MLN and GRIN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MLN and GRIN
The main advantage of trading using opposite MLN and GRIN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MLN position performs unexpectedly, GRIN 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 GRIN will offset losses from the drop in GRIN's long position.The idea behind MLN and GRIN 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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