Correlation Between Mantle and Reserve Rights

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

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

Diversification Opportunities for Mantle and Reserve Rights

0.8

Correlation Coefficient

Mantle  Reserve Rights

Very poor diversification

The 3 months correlation between Mantle and Reserve is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mantle and Reserve Rights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reserve Rights and Mantle 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 Mantle are associated (or correlated) with Reserve Rights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reserve Rights has no effect on the direction of Mantle i.e., Mantle and Reserve Rights go up and down completely randomly.

Pair Corralation between Mantle and Reserve Rights

Assuming the 90 days trading horizon Mantle is expected to generate 1.85 times less return on investment than Reserve Rights. But when comparing it to its historical volatility, Mantle is 4.16 times less risky than Reserve Rights. It trades about 0.28 of its potential returns per unit of risk. Reserve Rights is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.61  in Reserve Rights on September 14, 2024 and sell it today you would earn a total of  0.84  from holding Reserve Rights or generate 137.78% return on investment over 90 days.

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

Mantle  vs.  Reserve Rights

Mantle

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mantle are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Mantle sustained solid returns over the last few months and may actually be approaching a breakup point.

Reserve Rights

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reserve Rights are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Reserve Rights exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mantle and Reserve Rights

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

The idea behind Mantle and Reserve Rights 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.