Correlation Between MTI WIRELESS and Aedas Homes

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

By analyzing existing cross correlation between MTI WIRELESS EDGE and Aedas Homes SA, you can compare the effects of market volatilities on MTI WIRELESS and Aedas Homes 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 WIRELESS with a short position of Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTI WIRELESS and Aedas Homes.

Diversification Opportunities for MTI WIRELESS and Aedas Homes

0.19

Correlation Coefficient

MTI WIRELESS  Aedas Homes

Average diversification

The 3 months correlation between MTI and Aedas is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding MTI WIRELESS EDGE and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA and MTI WIRELESS 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 WIRELESS EDGE are associated (or correlated) with Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of MTI WIRELESS i.e., MTI WIRELESS and Aedas Homes go up and down completely randomly.

Pair Corralation between MTI WIRELESS and Aedas Homes

Assuming the 90 days horizon MTI WIRELESS EDGE is expected to generate 1.65 times more return on investment than Aedas Homes. However, MTI WIRELESS is 1.65 times more volatile than Aedas Homes SA. It trades about 0.05 of its potential returns per unit of risk. Aedas Homes SA is currently generating about 0.03 per unit of risk. If you would invest  43.00  in MTI WIRELESS EDGE on August 31, 2024 and sell it today you would earn a total of  3.00  from holding MTI WIRELESS EDGE or generate 6.98% return on investment over 90 days.

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

MTI WIRELESS EDGE  vs.  Aedas Homes SA

MTI WIRELESS EDGE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MTI WIRELESS EDGE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MTI WIRELESS may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Aedas Homes SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aedas Homes 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 WIRELESS and Aedas Homes

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

The idea behind MTI WIRELESS EDGE and Aedas Homes SA 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.