Correlation Between MTL and VINCI
Can any of the company-specific risk be diversified away by investing in both MTL and VINCI 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 MTL and VINCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTL and VINCI, you can compare the effects of market volatilities on MTL and VINCI 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 MTL with a short position of VINCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTL and VINCI.
Diversification Opportunities for MTL and VINCI
Very poor diversification
The 3 months correlation between MTL and VINCI is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding MTL and VINCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VINCI and MTL 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 MTL are associated (or correlated) with VINCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VINCI has no effect on the direction of MTL i.e., MTL and VINCI go up and down completely randomly.
Pair Corralation between MTL and VINCI
Assuming the 90 days trading horizon MTL is expected to generate 4.38 times less return on investment than VINCI. But when comparing it to its historical volatility, MTL is 6.73 times less risky than VINCI. It trades about 0.07 of its potential returns per unit of risk. VINCI is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.00 in VINCI on September 4, 2024 and sell it today you would earn a total of 1,197 from holding VINCI or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 58.17% |
| Values | Daily Returns |
MTL vs. VINCI
Performance |
| Timeline |
| MTL |
| VINCI |
MTL and VINCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTL and VINCI
The main advantage of trading using opposite MTL and VINCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTL position performs unexpectedly, VINCI 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 VINCI will offset losses from the drop in VINCI's long position.The idea behind MTL and VINCI 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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