Correlation Between Mattel and Global Lights

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

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

Diversification Opportunities for Mattel and Global Lights

-0.14

Correlation Coefficient

Mattel  Global Lights

Good diversification

The 3 months correlation between Mattel and Global is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and Global Lights Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Lights Acquisition and Mattel 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 Mattel Inc are associated (or correlated) with Global Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Lights Acquisition has no effect on the direction of Mattel i.e., Mattel and Global Lights go up and down completely randomly.

Pair Corralation between Mattel and Global Lights

Considering the 90-day investment horizon Mattel Inc is expected to under-perform the Global Lights. In addition to that, Mattel is 11.9 times more volatile than Global Lights Acquisition. It trades about -0.14 of its total potential returns per unit of risk. Global Lights Acquisition is currently generating about -0.22 per unit of volatility. If you would invest  1,080  in Global Lights Acquisition on October 10, 2024 and sell it today you would lose (5.00) from holding Global Lights Acquisition or give up 0.46% of portfolio value over 90 days.

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

Mattel Inc  vs.  Global Lights Acquisition

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mattel is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Global Lights Acquisition

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Lights Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Global Lights is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mattel and Global Lights

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

The idea behind Mattel Inc and Global Lights Acquisition 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.