Correlation Between Raytheon Technologies and MTI Wireless

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

By analyzing existing cross correlation between Raytheon Technologies Corp and MTI Wireless Edge, you can compare the effects of market volatilities on Raytheon Technologies and MTI Wireless 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 Raytheon Technologies with a short position of MTI Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and MTI Wireless.

Diversification Opportunities for Raytheon Technologies and MTI Wireless

0.25

Correlation Coefficient

Raytheon Technologies  MTI Wireless

Modest diversification

The 3 months correlation between Raytheon and MTI is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp and MTI Wireless Edge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTI Wireless Edge and Raytheon Technologies 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 Raytheon Technologies Corp are associated (or correlated) with MTI Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTI Wireless Edge has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and MTI Wireless go up and down completely randomly.

Pair Corralation between Raytheon Technologies and MTI Wireless

Assuming the 90 days trading horizon Raytheon Technologies Corp is expected to generate 0.56 times more return on investment than MTI Wireless. However, Raytheon Technologies Corp is 1.8 times less risky than MTI Wireless. It trades about 0.08 of its potential returns per unit of risk. MTI Wireless Edge is currently generating about 0.02 per unit of risk. If you would invest  8,262  in Raytheon Technologies Corp on September 28, 2024 and sell it today you would earn a total of  3,327  from holding Raytheon Technologies Corp or generate 40.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.81%
Values	Daily Returns

Raytheon Technologies Corp  vs.  MTI Wireless Edge

Raytheon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raytheon Technologies Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

MTI Wireless Edge

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTI Wireless Edge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Raytheon Technologies and MTI Wireless

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

The idea behind Raytheon Technologies Corp and MTI Wireless Edge 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.