Correlation Between MNW and GRIN
Can any of the company-specific risk be diversified away by investing in both MNW 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 MNW and GRIN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MNW and GRIN, you can compare the effects of market volatilities on MNW 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 MNW with a short position of GRIN. Check out your portfolio center. Please also check ongoing floating volatility patterns of MNW and GRIN.
Diversification Opportunities for MNW and GRIN
Modest diversification
The 3 months correlation between MNW and GRIN is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding MNW and GRIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRIN 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 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 MNW i.e., MNW and GRIN go up and down completely randomly.
Pair Corralation between MNW and GRIN
Assuming the 90 days trading horizon MNW is expected to under-perform the GRIN. In addition to that, MNW is 3.25 times more volatile than GRIN. It trades about -0.16 of its total potential returns per unit of risk. GRIN is currently generating about -0.15 per unit of volatility. If you would invest 2.95 in GRIN on November 8, 2024 and sell it today you would lose (0.76) from holding GRIN or give up 25.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MNW vs. GRIN
Performance |
| Timeline |
| MNW |
| GRIN |
MNW and GRIN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MNW and GRIN
The main advantage of trading using opposite MNW and GRIN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MNW 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 MNW 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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