Correlation Between DENT and MTL

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

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

Diversification Opportunities for DENT and MTL

0.94

Correlation Coefficient

DENT  MTL

Almost no diversification

The 3 months correlation between DENT and MTL is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding DENT and MTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTL and DENT 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 DENT 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 DENT i.e., DENT and MTL go up and down completely randomly.

Pair Corralation between DENT and MTL

Assuming the 90 days trading horizon DENT is expected to under-perform the MTL. In addition to that, DENT is 1.07 times more volatile than MTL. It trades about -0.13 of its total potential returns per unit of risk. MTL is currently generating about -0.1 per unit of volatility. If you would invest  112.00  in MTL on December 29, 2024 and sell it today you would lose (40.00) from holding MTL or give up 35.71% of portfolio value over 90 days.

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

DENT  vs.  MTL

DENT

Risk-Adjusted Performance

Very Weak

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

MTL

Risk-Adjusted Performance

Very Weak

Over the last 90 days MTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for MTL shareholders.

Pair Trading with DENT and MTL

The main advantage of trading using opposite DENT and MTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DENT 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 DENT 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.