Correlation Between Safety Insurance and MTI WIRELESS

Can any of the company-specific risk be diversified away by investing in both Safety Insurance and MTI WIRELESS 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 Safety Insurance and MTI WIRELESS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Safety Insurance Group and MTI WIRELESS EDGE, you can compare the effects of market volatilities on Safety Insurance and MTI WIRELESS 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 Safety Insurance with a short position of MTI WIRELESS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and MTI WIRELESS.

Diversification Opportunities for Safety Insurance and MTI WIRELESS

-0.57

Correlation Coefficient

Safety Insurance  MTI WIRELESS

Excellent diversification

The 3 months correlation between Safety and MTI is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and MTI WIRELESS EDGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTI WIRELESS EDGE and Safety Insurance 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 Safety Insurance Group are associated (or correlated) with MTI WIRELESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTI WIRELESS EDGE has no effect on the direction of Safety Insurance i.e., Safety Insurance and MTI WIRELESS go up and down completely randomly.

Pair Corralation between Safety Insurance and MTI WIRELESS

Assuming the 90 days horizon Safety Insurance Group is expected to generate 0.67 times more return on investment than MTI WIRELESS. However, Safety Insurance Group is 1.5 times less risky than MTI WIRELESS. It trades about 0.04 of its potential returns per unit of risk. MTI WIRELESS EDGE is currently generating about -0.21 per unit of risk. If you would invest  8,009  in Safety Insurance Group on September 12, 2024 and sell it today you would earn a total of  91.00  from holding Safety Insurance Group or generate 1.14% return on investment over 90 days.

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

Safety Insurance Group  vs.  MTI WIRELESS EDGE

Safety Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Insurance Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Safety Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

MTI WIRELESS EDGE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTI WIRELESS EDGE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Safety Insurance and MTI WIRELESS

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

The idea behind Safety Insurance Group and MTI WIRELESS EDGE 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.