Correlation Between MNW and Xai
Can any of the company-specific risk be diversified away by investing in both MNW and Xai 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 Xai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MNW and Xai, you can compare the effects of market volatilities on MNW and Xai 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 Xai. Check out your portfolio center. Please also check ongoing floating volatility patterns of MNW and Xai.
Diversification Opportunities for MNW and Xai
Weak diversification
The 3 months correlation between MNW and Xai is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding MNW and Xai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xai 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 Xai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xai has no effect on the direction of MNW i.e., MNW and Xai go up and down completely randomly.
Pair Corralation between MNW and Xai
Assuming the 90 days trading horizon MNW is expected to generate 25.25 times more return on investment than Xai. However, MNW is 25.25 times more volatile than Xai. It trades about 0.27 of its potential returns per unit of risk. Xai is currently generating about 0.44 per unit of risk. If you would invest 29.00 in MNW on September 4, 2024 and sell it today you would earn a total of 29.00 from holding MNW or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MNW vs. Xai
Performance |
| Timeline |
| MNW |
| Xai |
MNW and Xai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MNW and Xai
The main advantage of trading using opposite MNW and Xai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MNW position performs unexpectedly, Xai 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 Xai will offset losses from the drop in Xai's long position.The idea behind MNW and Xai 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |