Correlation Between MTI WIRELESS and NAKED WINES

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

Diversification Opportunities for MTI WIRELESS and NAKED WINES

-0.21

Correlation Coefficient

MTI WIRELESS  NAKED WINES

Very good diversification

The 3 months correlation between MTI and NAKED is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding MTI WIRELESS EDGE and NAKED WINES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAKED WINES PLC 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 NAKED WINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAKED WINES PLC has no effect on the direction of MTI WIRELESS i.e., MTI WIRELESS and NAKED WINES go up and down completely randomly.

Pair Corralation between MTI WIRELESS and NAKED WINES

Assuming the 90 days horizon MTI WIRELESS EDGE is expected to generate 1.64 times more return on investment than NAKED WINES. However, MTI WIRELESS is 1.64 times more volatile than NAKED WINES PLC. It trades about 0.22 of its potential returns per unit of risk. NAKED WINES PLC is currently generating about -0.04 per unit of risk. If you would invest  46.00  in MTI WIRELESS EDGE on October 22, 2024 and sell it today you would earn a total of  10.00  from holding MTI WIRELESS EDGE or generate 21.74% return on investment over 90 days.

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

MTI WIRELESS EDGE  vs.  NAKED WINES PLC

MTI WIRELESS EDGE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MTI WIRELESS EDGE are ranked lower than 5 (%) 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.

NAKED WINES PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAKED WINES PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MTI WIRELESS and NAKED WINES

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

The idea behind MTI WIRELESS EDGE and NAKED WINES PLC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..