Correlation Between MNW and EM
Can any of the company-specific risk be diversified away by investing in both MNW and EM 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 MNW and EM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MNW and EM, you can compare the effects of market volatilities on MNW and EM 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 MNW with a short position of EM. Check out your portfolio center. Please also check ongoing floating volatility patterns of MNW and EM.
Diversification Opportunities for MNW and EM
Pay attention - limited upside
The 3 months correlation between MNW and EM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MNW and EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EM and MNW 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 MNW are associated (or correlated) with EM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EM has no effect on the direction of MNW i.e., MNW and EM go up and down completely randomly.
Pair Corralation between MNW and EM
If you would invest 35.00 in MNW on August 23, 2024 and sell it today you would lose (2.00) from holding MNW or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MNW vs. EM
Performance |
| Timeline |
| MNW |
| EM |
MNW and EM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MNW and EM
The main advantage of trading using opposite MNW and EM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MNW position performs unexpectedly, EM 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 EM will offset losses from the drop in EM's long position.The idea behind MNW and EM 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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