Correlation Between MTI Investment and ALM Equity

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

By analyzing existing cross correlation between MTI Investment SE and ALM Equity AB, you can compare the effects of market volatilities on MTI Investment and ALM Equity 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 Investment with a short position of ALM Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTI Investment and ALM Equity.

Diversification Opportunities for MTI Investment and ALM Equity

0.42

Correlation Coefficient

MTI Investment  ALM Equity

Very weak diversification

The 3 months correlation between MTI and ALM is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding MTI Investment SE and ALM Equity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM Equity AB and MTI Investment 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 Investment SE are associated (or correlated) with ALM Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM Equity AB has no effect on the direction of MTI Investment i.e., MTI Investment and ALM Equity go up and down completely randomly.

Pair Corralation between MTI Investment and ALM Equity

Assuming the 90 days trading horizon MTI Investment SE is expected to under-perform the ALM Equity. In addition to that, MTI Investment is 6.54 times more volatile than ALM Equity AB. It trades about -0.05 of its total potential returns per unit of risk. ALM Equity AB is currently generating about -0.05 per unit of volatility. If you would invest  8,246  in ALM Equity AB on December 30, 2024 and sell it today you would lose (176.00) from holding ALM Equity AB or give up 2.13% of portfolio value over 90 days.

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

MTI Investment SE  vs.  ALM Equity AB

MTI Investment SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days MTI Investment SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ALM Equity AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALM Equity AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ALM Equity is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MTI Investment and ALM Equity

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

The idea behind MTI Investment SE and ALM Equity AB 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.