Correlation Between MTN and Huge
Can any of the company-specific risk be diversified away by investing in both MTN and Huge 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 MTN and Huge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTN Group and Huge Group, you can compare the effects of market volatilities on MTN and Huge 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 MTN with a short position of Huge. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN and Huge.
Diversification Opportunities for MTN and Huge
Significant diversification
The 3 months correlation between MTN and Huge is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group and Huge Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huge Group and MTN 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 MTN Group are associated (or correlated) with Huge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huge Group has no effect on the direction of MTN i.e., MTN and Huge go up and down completely randomly.
Pair Corralation between MTN and Huge
Assuming the 90 days trading horizon MTN Group is expected to under-perform the Huge. In addition to that, MTN is 1.61 times more volatile than Huge Group. It trades about -0.3 of its total potential returns per unit of risk. Huge Group is currently generating about -0.03 per unit of volatility. If you would invest 20,000 in Huge Group on August 24, 2024 and sell it today you would lose (100.00) from holding Huge Group or give up 0.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
MTN Group vs. Huge Group
Performance |
| Timeline |
| MTN Group |
| Huge Group |
MTN and Huge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTN and Huge
The main advantage of trading using opposite MTN and Huge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTN position performs unexpectedly, Huge 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 Huge will offset losses from the drop in Huge's long position.| MTN vs. Reinet Investments SCA | MTN vs. Hosken Consolidated Investments | MTN vs. Standard Bank Group | MTN vs. Brimstone 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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