Correlation Between MTI WIRELESS and Haier Smart

Can any of the company-specific risk be diversified away by investing in both MTI WIRELESS and Haier Smart 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 Haier Smart 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 Haier Smart Home, you can compare the effects of market volatilities on MTI WIRELESS and Haier Smart 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 Haier Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTI WIRELESS and Haier Smart.

Diversification Opportunities for MTI WIRELESS and Haier Smart

0.63

Correlation Coefficient

MTI WIRELESS  Haier Smart

Poor diversification

The 3 months correlation between MTI and Haier is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding MTI WIRELESS EDGE and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home 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 Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of MTI WIRELESS i.e., MTI WIRELESS and Haier Smart go up and down completely randomly.

Pair Corralation between MTI WIRELESS and Haier Smart

Assuming the 90 days horizon MTI WIRELESS EDGE is expected to generate 4.88 times more return on investment than Haier Smart. However, MTI WIRELESS is 4.88 times more volatile than Haier Smart Home. It trades about 0.09 of its potential returns per unit of risk. Haier Smart Home is currently generating about 0.07 per unit of risk. If you would invest  46.00  in MTI WIRELESS EDGE on November 29, 2024 and sell it today you would earn a total of  13.00  from holding MTI WIRELESS EDGE or generate 28.26% return on investment over 90 days.

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

MTI WIRELESS EDGE  vs.  Haier Smart Home

MTI WIRELESS EDGE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MTI WIRELESS EDGE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MTI WIRELESS reported solid returns over the last few months and may actually be approaching a breakup point.

Haier Smart Home

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Haier Smart may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with MTI WIRELESS and Haier Smart

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

The idea behind MTI WIRELESS EDGE and Haier Smart Home 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.