Correlation Between VINCI and MTL
Can any of the company-specific risk be diversified away by investing in both VINCI and MTL 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 VINCI and MTL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VINCI and MTL, you can compare the effects of market volatilities on VINCI and MTL 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 VINCI with a short position of MTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of VINCI and MTL.
Diversification Opportunities for VINCI and MTL
Modest diversification
The 3 months correlation between VINCI and MTL is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding VINCI and MTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTL and VINCI 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 VINCI are associated (or correlated) with MTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTL has no effect on the direction of VINCI i.e., VINCI and MTL go up and down completely randomly.
Pair Corralation between VINCI and MTL
Assuming the 90 days trading horizon VINCI is expected to generate 0.33 times more return on investment than MTL. However, VINCI is 3.01 times less risky than MTL. It trades about -0.04 of its potential returns per unit of risk. MTL is currently generating about -0.12 per unit of risk. If you would invest 1,255 in VINCI on November 10, 2024 and sell it today you would lose (56.00) from holding VINCI or give up 4.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VINCI vs. MTL
Performance |
| Timeline |
| VINCI |
| MTL |
VINCI and MTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VINCI and MTL
The main advantage of trading using opposite VINCI and MTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VINCI position performs unexpectedly, MTL 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 MTL will offset losses from the drop in MTL's long position.The idea behind VINCI and MTL 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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