Correlation Between MP Materials and MAHLE Metal

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

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

Diversification Opportunities for MP Materials and MAHLE Metal

-0.58

Correlation Coefficient

MP Materials  MAHLE Metal

Excellent diversification

The 3 months correlation between M2PM34 and MAHLE is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding MP Materials Corp and MAHLE Metal Leve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAHLE Metal Leve and MP Materials 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 MP Materials Corp are associated (or correlated) with MAHLE Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAHLE Metal Leve has no effect on the direction of MP Materials i.e., MP Materials and MAHLE Metal go up and down completely randomly.

Pair Corralation between MP Materials and MAHLE Metal

Assuming the 90 days trading horizon MP Materials Corp is expected to generate 2.5 times more return on investment than MAHLE Metal. However, MP Materials is 2.5 times more volatile than MAHLE Metal Leve. It trades about -0.01 of its potential returns per unit of risk. MAHLE Metal Leve is currently generating about -0.19 per unit of risk. If you would invest  2,106  in MP Materials Corp on October 7, 2024 and sell it today you would lose (128.00) from holding MP Materials Corp or give up 6.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.37%
Values	Daily Returns

MP Materials Corp  vs.  MAHLE Metal Leve

MP Materials Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MP Materials Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MP Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with MP Materials and MAHLE Metal

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

The idea behind MP Materials Corp and MAHLE Metal Leve 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.