Correlation Between MTI Wireless and Hardide PLC

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

Diversification Opportunities for MTI Wireless and Hardide PLC

0.56

Correlation Coefficient

MTI Wireless  Hardide PLC

Very weak diversification

The 3 months correlation between MTI and Hardide is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge and Hardide PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hardide 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 Hardide PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hardide PLC has no effect on the direction of MTI Wireless i.e., MTI Wireless and Hardide PLC go up and down completely randomly.

Pair Corralation between MTI Wireless and Hardide PLC

Assuming the 90 days trading horizon MTI Wireless is expected to generate 2.0 times less return on investment than Hardide PLC. But when comparing it to its historical volatility, MTI Wireless Edge is 2.23 times less risky than Hardide PLC. It trades about 0.15 of its potential returns per unit of risk. Hardide PLC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  485.00  in Hardide PLC on November 28, 2024 and sell it today you would earn a total of  190.00  from holding Hardide PLC or generate 39.18% 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.  Hardide PLC

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 unsteady technical and fundamental indicators, MTI Wireless exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hardide PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hardide PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Hardide PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTI Wireless and Hardide PLC

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

The idea behind MTI Wireless Edge and Hardide 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.