Correlation Between MTI Wireless and Auto Trader
Can any of the company-specific risk be diversified away by investing in both MTI Wireless and Auto Trader 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 MTI Wireless and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTI Wireless Edge and Auto Trader Group, you can compare the effects of market volatilities on MTI Wireless and Auto Trader 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 MTI Wireless with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTI Wireless and Auto Trader.
Diversification Opportunities for MTI Wireless and Auto Trader
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MTI and Auto is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and MTI Wireless 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 MTI Wireless Edge are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of MTI Wireless i.e., MTI Wireless and Auto Trader go up and down completely randomly.
Pair Corralation between MTI Wireless and Auto Trader
Assuming the 90 days trading horizon MTI Wireless Edge is expected to under-perform the Auto Trader. But the stock apears to be less risky and, when comparing its historical volatility, MTI Wireless Edge is 1.72 times less risky than Auto Trader. The stock trades about -0.14 of its potential returns per unit of risk. The Auto Trader Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 84,420 in Auto Trader Group on September 2, 2024 and sell it today you would lose (520.00) from holding Auto Trader Group or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTI Wireless Edge vs. Auto Trader Group
Performance |
| Timeline |
| MTI Wireless Edge |
| Auto Trader Group |
MTI Wireless and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTI Wireless and Auto Trader
The main advantage of trading using opposite MTI Wireless and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTI Wireless position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| MTI Wireless vs. Ross Stores | MTI Wireless vs. Uber Technologies | MTI Wireless vs. Ashtead Technology Holdings | MTI Wireless vs. Playtech Plc |
| Auto Trader vs. Catalyst Media Group | Auto Trader vs. Tamburi Investment Partners | Auto Trader vs. Magnora ASA | Auto Trader vs. RTW Venture Fund |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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