Correlation Between Auction Technology and MTI Wireless

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

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

Diversification Opportunities for Auction Technology and MTI Wireless

-0.61

Correlation Coefficient

Auction Technology  MTI Wireless

Excellent diversification

The 3 months correlation between Auction and MTI is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Auction Technology Group 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 Auction Technology 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 Auction Technology Group 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 Auction Technology i.e., Auction Technology and MTI Wireless go up and down completely randomly.

Pair Corralation between Auction Technology and MTI Wireless

Assuming the 90 days trading horizon Auction Technology Group is expected to generate 3.39 times more return on investment than MTI Wireless. However, Auction Technology is 3.39 times more volatile than MTI Wireless Edge. It trades about 0.29 of its potential returns per unit of risk. MTI Wireless Edge is currently generating about -0.19 per unit of risk. If you would invest  44,500  in Auction Technology Group on September 25, 2024 and sell it today you would earn a total of  11,200  from holding Auction Technology Group or generate 25.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Auction Technology Group  vs.  MTI Wireless Edge

Auction Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Auction Technology Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Auction Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Auction Technology and MTI Wireless

The main advantage of trading using opposite Auction Technology and MTI Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auction Technology 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 Auction Technology Group 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.