Correlation Between MAHLE Metal and Roku

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

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

Diversification Opportunities for MAHLE Metal and Roku

-0.56

Correlation Coefficient

MAHLE Metal  Roku

Excellent diversification

The 3 months correlation between MAHLE and Roku is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding MAHLE Metal Leve and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku Inc and MAHLE Metal 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 MAHLE Metal Leve are associated (or correlated) with Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of MAHLE Metal i.e., MAHLE Metal and Roku go up and down completely randomly.

Pair Corralation between MAHLE Metal and Roku

Assuming the 90 days trading horizon MAHLE Metal is expected to generate 2.16 times less return on investment than Roku. But when comparing it to its historical volatility, MAHLE Metal Leve is 1.26 times less risky than Roku. It trades about 0.03 of its potential returns per unit of risk. Roku Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,412  in Roku Inc on October 14, 2024 and sell it today you would earn a total of  1,030  from holding Roku Inc or generate 72.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

MAHLE Metal Leve  vs.  Roku Inc

MAHLE Metal Leve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAHLE Metal Leve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Roku Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Roku Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Roku sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MAHLE Metal and Roku

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

The idea behind MAHLE Metal Leve and Roku Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.