Correlation Between MTI Wireless and CleanTech Lithium

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

Diversification Opportunities for MTI Wireless and CleanTech Lithium

-0.03

Correlation Coefficient

MTI Wireless  CleanTech Lithium

Good diversification

The 3 months correlation between MTI and CleanTech is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge and CleanTech Lithium plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CleanTech Lithium plc 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 CleanTech Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CleanTech Lithium plc has no effect on the direction of MTI Wireless i.e., MTI Wireless and CleanTech Lithium go up and down completely randomly.

Pair Corralation between MTI Wireless and CleanTech Lithium

Assuming the 90 days trading horizon MTI Wireless Edge is expected to generate 0.48 times more return on investment than CleanTech Lithium. However, MTI Wireless Edge is 2.09 times less risky than CleanTech Lithium. It trades about 0.05 of its potential returns per unit of risk. CleanTech Lithium plc is currently generating about -0.2 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.  CleanTech Lithium plc

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.

CleanTech Lithium plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CleanTech Lithium plc 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.

Pair Trading with MTI Wireless and CleanTech Lithium

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

The idea behind MTI Wireless Edge and CleanTech Lithium plc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.