Correlation Between MTN Group and DHI

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

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

Diversification Opportunities for MTN Group and DHI

-0.01

Correlation Coefficient

MTN Group  DHI

Good diversification

The 3 months correlation between MTN and DHI is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group Limited and DHI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHI Group and MTN Group 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 Limited are associated (or correlated) with DHI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHI Group has no effect on the direction of MTN Group i.e., MTN Group and DHI go up and down completely randomly.

Pair Corralation between MTN Group and DHI

Assuming the 90 days horizon MTN Group is expected to generate 2.86 times less return on investment than DHI. But when comparing it to its historical volatility, MTN Group Limited is 2.11 times less risky than DHI. It trades about 0.24 of its potential returns per unit of risk. DHI Group is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  177.00  in DHI Group on October 24, 2024 and sell it today you would earn a total of  50.00  from holding DHI Group or generate 28.25% return on investment over 90 days.

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

MTN Group Limited  vs.  DHI Group

MTN Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

DHI Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DHI Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical indicators, DHI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTN Group and DHI

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

The idea behind MTN Group Limited and DHI Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.