Correlation Between NEL ASA and MTI WIRELESS

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

By analyzing existing cross correlation between NEL ASA ADR30 and MTI WIRELESS EDGE, you can compare the effects of market volatilities on NEL ASA 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 NEL ASA with a short position of MTI WIRELESS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEL ASA and MTI WIRELESS.

Diversification Opportunities for NEL ASA and MTI WIRELESS

-0.04

Correlation Coefficient

NEL ASA  MTI WIRELESS

Good diversification

The 3 months correlation between NEL and MTI is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NEL ASA ADR30 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 NEL ASA 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 NEL ASA ADR30 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 NEL ASA i.e., NEL ASA and MTI WIRELESS go up and down completely randomly.

Pair Corralation between NEL ASA and MTI WIRELESS

Assuming the 90 days trading horizon NEL ASA is expected to generate 2.4 times less return on investment than MTI WIRELESS. In addition to that, NEL ASA is 1.05 times more volatile than MTI WIRELESS EDGE. It trades about 0.04 of its total potential returns per unit of risk. MTI WIRELESS EDGE is currently generating about 0.09 per unit of volatility. If you would invest  46.00  in MTI WIRELESS EDGE on December 27, 2024 and sell it today you would earn a total of  14.00  from holding MTI WIRELESS EDGE or generate 30.43% return on investment over 90 days.

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

NEL ASA ADR30  vs.  MTI WIRELESS EDGE

NEL ASA ADR30

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NEL ASA ADR30 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, NEL ASA reported solid returns over the last few months and may actually be approaching a breakup point.

MTI WIRELESS EDGE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MTI WIRELESS EDGE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MTI WIRELESS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEL ASA and MTI WIRELESS

The main advantage of trading using opposite NEL ASA and MTI WIRELESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEL ASA 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's long position.

The idea behind NEL ASA ADR30 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.