Correlation Between MetaLabs and Settlebank

Can any of the company-specific risk be diversified away by investing in both MetaLabs and Settlebank 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 MetaLabs and Settlebank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MetaLabs Co and Settlebank, you can compare the effects of market volatilities on MetaLabs and Settlebank 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 MetaLabs with a short position of Settlebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetaLabs and Settlebank.

Diversification Opportunities for MetaLabs and Settlebank

-0.4

Correlation Coefficient

MetaLabs  Settlebank

Very good diversification

The 3 months correlation between MetaLabs and Settlebank is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding MetaLabs Co and Settlebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Settlebank and MetaLabs 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 MetaLabs Co are associated (or correlated) with Settlebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Settlebank has no effect on the direction of MetaLabs i.e., MetaLabs and Settlebank go up and down completely randomly.

Pair Corralation between MetaLabs and Settlebank

Assuming the 90 days trading horizon MetaLabs Co is expected to generate 0.83 times more return on investment than Settlebank. However, MetaLabs Co is 1.2 times less risky than Settlebank. It trades about 0.12 of its potential returns per unit of risk. Settlebank is currently generating about -0.05 per unit of risk. If you would invest  130,800  in MetaLabs Co on December 27, 2024 and sell it today you would earn a total of  16,400  from holding MetaLabs Co or generate 12.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MetaLabs Co  vs.  Settlebank

MetaLabs

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetaLabs Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MetaLabs sustained solid returns over the last few months and may actually be approaching a breakup point.

Settlebank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Settlebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with MetaLabs and Settlebank

The main advantage of trading using opposite MetaLabs and Settlebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetaLabs position performs unexpectedly, Settlebank 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 Settlebank will offset losses from the drop in Settlebank's long position.

The idea behind MetaLabs Co and Settlebank 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.