Correlation Between Sphere Entertainment and Montauk Renewables

Can any of the company-specific risk be diversified away by investing in both Sphere Entertainment and Montauk Renewables 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 Sphere Entertainment and Montauk Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sphere Entertainment Co and Montauk Renewables, you can compare the effects of market volatilities on Sphere Entertainment and Montauk Renewables 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 Sphere Entertainment with a short position of Montauk Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sphere Entertainment and Montauk Renewables.

Diversification Opportunities for Sphere Entertainment and Montauk Renewables

0.84

Correlation Coefficient

Sphere Entertainment  Montauk Renewables

Very poor diversification

The 3 months correlation between Sphere and Montauk is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables and Sphere Entertainment 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 Sphere Entertainment Co are associated (or correlated) with Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Sphere Entertainment i.e., Sphere Entertainment and Montauk Renewables go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Montauk Renewables

Given the investment horizon of 90 days Sphere Entertainment Co is expected to generate 0.88 times more return on investment than Montauk Renewables. However, Sphere Entertainment Co is 1.13 times less risky than Montauk Renewables. It trades about -0.1 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.28 per unit of risk. If you would invest  4,104  in Sphere Entertainment Co on September 22, 2024 and sell it today you would lose (234.00) from holding Sphere Entertainment Co or give up 5.7% of portfolio value over 90 days.

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

Sphere Entertainment Co  vs.  Montauk Renewables

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sphere Entertainment and Montauk Renewables

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

The idea behind Sphere Entertainment Co and Montauk Renewables 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.