Correlation Between Mantle and WAXP

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

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

Diversification Opportunities for Mantle and WAXP

0.66

Correlation Coefficient

Mantle  WAXP

Poor diversification

The 3 months correlation between Mantle and WAXP is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Mantle and WAXP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WAXP 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 WAXP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WAXP has no effect on the direction of Mantle i.e., Mantle and WAXP go up and down completely randomly.

Pair Corralation between Mantle and WAXP

Assuming the 90 days trading horizon Mantle is expected to generate 0.8 times more return on investment than WAXP. However, Mantle is 1.25 times less risky than WAXP. It trades about 0.27 of its potential returns per unit of risk. WAXP is currently generating about 0.12 per unit of risk. If you would invest  59.00  in Mantle on October 9, 2024 and sell it today you would earn a total of  77.00  from holding Mantle or generate 130.51% return on investment over 90 days.

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

Mantle  vs.  WAXP

Mantle

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mantle are ranked lower than 20 (%) 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.

WAXP

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Mantle and WAXP

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

The idea behind Mantle and WAXP 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.