Correlation Between MTI Wireless and Herald Investment

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

Diversification Opportunities for MTI Wireless and Herald Investment

0.05

Correlation Coefficient

MTI Wireless  Herald Investment

Significant diversification

The 3 months correlation between MTI and Herald is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge and Herald Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herald Investment Trust 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 Herald Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herald Investment Trust has no effect on the direction of MTI Wireless i.e., MTI Wireless and Herald Investment go up and down completely randomly.

Pair Corralation between MTI Wireless and Herald Investment

Assuming the 90 days trading horizon MTI Wireless Edge is expected to generate 1.12 times more return on investment than Herald Investment. However, MTI Wireless is 1.12 times more volatile than Herald Investment Trust. It trades about 0.18 of its potential returns per unit of risk. Herald Investment Trust is currently generating about 0.14 per unit of risk. If you would invest  4,550  in MTI Wireless Edge on October 24, 2024 and sell it today you would earn a total of  750.00  from holding MTI Wireless Edge or generate 16.48% return on investment over 90 days.

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

MTI Wireless Edge  vs.  Herald Investment Trust

MTI Wireless Edge

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MTI Wireless Edge are ranked lower than 14 (%) 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.

Herald Investment Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Herald Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MTI Wireless and Herald Investment

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

The idea behind MTI Wireless Edge and Herald Investment Trust 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.