Correlation Between Eco Animal and MTI Wireless

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

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

Diversification Opportunities for Eco Animal and MTI Wireless

-0.87

Correlation Coefficient

Eco Animal  MTI Wireless

Pay attention - limited upside

The 3 months correlation between Eco and MTI is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Eco Animal Health 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 Eco Animal 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 Eco Animal Health 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 Eco Animal i.e., Eco Animal and MTI Wireless go up and down completely randomly.

Pair Corralation between Eco Animal and MTI Wireless

Assuming the 90 days trading horizon Eco Animal Health is expected to under-perform the MTI Wireless. But the stock apears to be less risky and, when comparing its historical volatility, Eco Animal Health is 1.65 times less risky than MTI Wireless. The stock trades about -0.14 of its potential returns per unit of risk. The MTI Wireless Edge is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,055  in MTI Wireless Edge on December 28, 2024 and sell it today you would earn a total of  1,270  from holding MTI Wireless Edge or generate 31.32% return on investment over 90 days.

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

Eco Animal Health  vs.  MTI Wireless Edge

Eco Animal Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eco Animal Health 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 Stock's technical and 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 the firm shareholders.

MTI Wireless Edge

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MTI Wireless Edge are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, MTI Wireless exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eco Animal and MTI Wireless

The main advantage of trading using opposite Eco Animal and MTI Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eco Animal 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 Eco Animal Health 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.