Correlation Between MTI Wireless and BH Macro

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

Diversification Opportunities for MTI Wireless and BH Macro

-0.06

Correlation Coefficient

MTI Wireless  BH Macro

Good diversification

The 3 months correlation between MTI and BHMU is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge and BH Macro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Macro Limited 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 BH Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Macro Limited has no effect on the direction of MTI Wireless i.e., MTI Wireless and BH Macro go up and down completely randomly.

Pair Corralation between MTI Wireless and BH Macro

Assuming the 90 days trading horizon MTI Wireless Edge is expected to generate 1.55 times more return on investment than BH Macro. However, MTI Wireless is 1.55 times more volatile than BH Macro Limited. It trades about 0.05 of its potential returns per unit of risk. BH Macro Limited is currently generating about 0.08 per unit of risk. If you would invest  4,250  in MTI Wireless Edge on September 3, 2024 and sell it today you would earn a total of  250.00  from holding MTI Wireless Edge or generate 5.88% 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.  BH Macro Limited

MTI Wireless Edge

Risk-Adjusted Performance

4 of 100

Insignificant

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

BH Macro Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BH Macro Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, BH Macro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MTI Wireless and BH Macro

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

The idea behind MTI Wireless Edge and BH Macro Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.