Correlation Between MLN and ITC
Can any of the company-specific risk be diversified away by investing in both MLN and ITC 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 ITC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MLN and ITC, you can compare the effects of market volatilities on MLN and ITC 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 ITC. Check out your portfolio center. Please also check ongoing floating volatility patterns of MLN and ITC.
Diversification Opportunities for MLN and ITC
Good diversification
The 3 months correlation between MLN and ITC is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding MLN and ITC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITC 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 ITC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITC has no effect on the direction of MLN i.e., MLN and ITC go up and down completely randomly.
Pair Corralation between MLN and ITC
If you would invest 1,481 in MLN on September 4, 2024 and sell it today you would earn a total of 680.00 from holding MLN or generate 45.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 4.55% |
| Values | Daily Returns |
MLN vs. ITC
Performance |
| Timeline |
| MLN |
| ITC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
MLN and ITC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MLN and ITC
The main advantage of trading using opposite MLN and ITC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MLN position performs unexpectedly, ITC 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 ITC will offset losses from the drop in ITC's long position.The idea behind MLN and ITC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |