Correlation Between MTI Wireless and Eco Animal

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

Diversification Opportunities for MTI Wireless and Eco Animal

-0.76

Correlation Coefficient

MTI Wireless  Eco Animal

Pay attention - limited upside

The 3 months correlation between MTI and Eco is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge and Eco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Animal Health 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 Eco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Animal Health has no effect on the direction of MTI Wireless i.e., MTI Wireless and Eco Animal go up and down completely randomly.

Pair Corralation between MTI Wireless and Eco Animal

Assuming the 90 days trading horizon MTI Wireless Edge is expected to generate 1.65 times more return on investment than Eco Animal. However, MTI Wireless is 1.65 times more volatile than Eco Animal Health. It trades about 0.14 of its potential returns per unit of risk. Eco Animal Health is currently generating about -0.14 per unit of risk. If you would invest  4,055  in MTI Wireless Edge on December 28, 2024 and sell it today you would earn a total of  1,270  from holding MTI Wireless Edge or generate 31.32% return on investment over 90 days.

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

MTI Wireless Edge  vs.  Eco Animal Health

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 11 (%) 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.

Eco Animal Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eco Animal Health 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with MTI Wireless and Eco Animal

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

The idea behind MTI Wireless Edge and Eco Animal Health 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.