Correlation Between MT 1997 and Photon Energy

Can any of the company-specific risk be diversified away by investing in both MT 1997 and Photon Energy 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 MT 1997 and Photon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MT 1997 AS and Photon Energy NV, you can compare the effects of market volatilities on MT 1997 and Photon Energy 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 MT 1997 with a short position of Photon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT 1997 and Photon Energy.

Diversification Opportunities for MT 1997 and Photon Energy

0.4

Correlation Coefficient

MT 1997  Photon Energy

Very weak diversification

The 3 months correlation between KLIKY and Photon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding MT 1997 AS and Photon Energy NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photon Energy NV and MT 1997 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 MT 1997 AS are associated (or correlated) with Photon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photon Energy NV has no effect on the direction of MT 1997 i.e., MT 1997 and Photon Energy go up and down completely randomly.

Pair Corralation between MT 1997 and Photon Energy

Assuming the 90 days trading horizon MT 1997 AS is expected to generate 0.52 times more return on investment than Photon Energy. However, MT 1997 AS is 1.93 times less risky than Photon Energy. It trades about 0.08 of its potential returns per unit of risk. Photon Energy NV is currently generating about -0.09 per unit of risk. If you would invest  2,700,000  in MT 1997 AS on November 27, 2024 and sell it today you would earn a total of  140,000  from holding MT 1997 AS or generate 5.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

MT 1997 AS  vs.  Photon Energy NV

MT 1997 AS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MT 1997 AS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, MT 1997 is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Photon Energy NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Photon Energy NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with MT 1997 and Photon Energy

The main advantage of trading using opposite MT 1997 and Photon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT 1997 position performs unexpectedly, Photon Energy 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 Photon Energy will offset losses from the drop in Photon Energy's long position.

The idea behind MT 1997 AS and Photon Energy NV 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.