Correlation Between MTI Wireless and Givaudan

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

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

Diversification Opportunities for MTI Wireless and Givaudan

0.43

Correlation Coefficient

MTI Wireless  Givaudan

Very weak diversification

The 3 months correlation between MTI and Givaudan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and MTI Wireless 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 Wireless Edge are associated (or correlated) with Givaudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Givaudan SA has no effect on the direction of MTI Wireless i.e., MTI Wireless and Givaudan go up and down completely randomly.

Pair Corralation between MTI Wireless and Givaudan

Assuming the 90 days trading horizon MTI Wireless Edge is expected to generate 2.56 times more return on investment than Givaudan. However, MTI Wireless is 2.56 times more volatile than Givaudan SA. It trades about 0.16 of its potential returns per unit of risk. Givaudan SA is currently generating about -0.01 per unit of risk. If you would invest  4,300  in MTI Wireless Edge on December 22, 2024 and sell it today you would earn a total of  1,550  from holding MTI Wireless Edge or generate 36.05% return on investment over 90 days.

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

MTI Wireless Edge  vs.  Givaudan SA

MTI Wireless Edge

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MTI Wireless Edge are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, MTI Wireless exhibited solid returns over the last few months and may actually be approaching a breakup point.

Givaudan SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Givaudan SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Givaudan 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 MTI Wireless and Givaudan

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

The idea behind MTI Wireless Edge and Givaudan SA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.