Correlation Between MTI Wireless and Alfa Financial

Can any of the company-specific risk be diversified away by investing in both MTI Wireless and Alfa Financial 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 Alfa Financial 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 Alfa Financial Software, you can compare the effects of market volatilities on MTI Wireless and Alfa Financial 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 Alfa Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTI Wireless and Alfa Financial.

Diversification Opportunities for MTI Wireless and Alfa Financial

-0.35

Correlation Coefficient

MTI Wireless  Alfa Financial

Very good diversification

The 3 months correlation between MTI and Alfa is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software 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 Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of MTI Wireless i.e., MTI Wireless and Alfa Financial go up and down completely randomly.

Pair Corralation between MTI Wireless and Alfa Financial

Assuming the 90 days trading horizon MTI Wireless is expected to generate 1.11 times less return on investment than Alfa Financial. In addition to that, MTI Wireless is 1.1 times more volatile than Alfa Financial Software. It trades about 0.06 of its total potential returns per unit of risk. Alfa Financial Software is currently generating about 0.08 per unit of volatility. If you would invest  14,896  in Alfa Financial Software on September 23, 2024 and sell it today you would earn a total of  6,654  from holding Alfa Financial Software or generate 44.67% return on investment over 90 days.

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

MTI Wireless Edge  vs.  Alfa Financial Software

MTI Wireless Edge

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTI Wireless Edge 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alfa Financial Software

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MTI Wireless and Alfa Financial

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

The idea behind MTI Wireless Edge and Alfa Financial Software 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.