Correlation Between MTN and Renergen

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

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

Diversification Opportunities for MTN and Renergen

-0.17

Correlation Coefficient

MTN  Renergen

Good diversification

The 3 months correlation between MTN and Renergen is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group and Renergen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renergen and MTN 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 MTN Group are associated (or correlated) with Renergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renergen has no effect on the direction of MTN i.e., MTN and Renergen go up and down completely randomly.

Pair Corralation between MTN and Renergen

Assuming the 90 days trading horizon MTN Group is expected to generate 0.24 times more return on investment than Renergen. However, MTN Group is 4.21 times less risky than Renergen. It trades about 0.22 of its potential returns per unit of risk. Renergen is currently generating about 0.03 per unit of risk. If you would invest  928,700  in MTN Group on December 30, 2024 and sell it today you would earn a total of  320,700  from holding MTN Group or generate 34.53% return on investment over 90 days.

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

MTN Group  vs.  Renergen

MTN Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MTN Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, MTN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Renergen

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Renergen are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Renergen exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTN and Renergen

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

The idea behind MTN Group and Renergen 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 Global Correlations module to find global opportunities by holding instruments from different markets.