Correlation Between MTI INVESTMENT and IBERDROLA ADR/1

Can any of the company-specific risk be diversified away by investing in both MTI INVESTMENT and IBERDROLA ADR/1 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 MTI INVESTMENT and IBERDROLA ADR/1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MTI INVESTMENT SE and IBERDROLA ADR1 EO, you can compare the effects of market volatilities on MTI INVESTMENT and IBERDROLA ADR/1 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 MTI INVESTMENT with a short position of IBERDROLA ADR/1. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTI INVESTMENT and IBERDROLA ADR/1.

Diversification Opportunities for MTI INVESTMENT and IBERDROLA ADR/1

0.54

Correlation Coefficient

MTI INVESTMENT  IBERDROLA ADR/1

Very weak diversification

The 3 months correlation between MTI and IBERDROLA is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding MTI INVESTMENT SE and IBERDROLA ADR1 EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBERDROLA ADR1 EO and MTI INVESTMENT 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 MTI INVESTMENT SE are associated (or correlated) with IBERDROLA ADR/1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBERDROLA ADR1 EO has no effect on the direction of MTI INVESTMENT i.e., MTI INVESTMENT and IBERDROLA ADR/1 go up and down completely randomly.

Pair Corralation between MTI INVESTMENT and IBERDROLA ADR/1

Assuming the 90 days horizon MTI INVESTMENT SE is expected to under-perform the IBERDROLA ADR/1. In addition to that, MTI INVESTMENT is 3.23 times more volatile than IBERDROLA ADR1 EO. It trades about -0.29 of its total potential returns per unit of risk. IBERDROLA ADR1 EO is currently generating about -0.21 per unit of volatility. If you would invest  5,350  in IBERDROLA ADR1 EO on October 4, 2024 and sell it today you would lose (150.00) from holding IBERDROLA ADR1 EO or give up 2.8% of portfolio value over 90 days.

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

MTI INVESTMENT SE  vs.  IBERDROLA ADR1 EO

MTI INVESTMENT SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTI INVESTMENT SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

IBERDROLA ADR1 EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IBERDROLA ADR1 EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IBERDROLA ADR/1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MTI INVESTMENT and IBERDROLA ADR/1

The main advantage of trading using opposite MTI INVESTMENT and IBERDROLA ADR/1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTI INVESTMENT position performs unexpectedly, IBERDROLA ADR/1 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 IBERDROLA ADR/1 will offset losses from the drop in IBERDROLA ADR/1's long position.

The idea behind MTI INVESTMENT SE and IBERDROLA ADR1 EO 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.