Correlation Between MetaLabs and I-Components

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

By analyzing existing cross correlation between MetaLabs Co and i Components Co, you can compare the effects of market volatilities on MetaLabs and I-Components 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 MetaLabs with a short position of I-Components. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetaLabs and I-Components.

Diversification Opportunities for MetaLabs and I-Components

-0.29

Correlation Coefficient

MetaLabs  I-Components

Very good diversification

The 3 months correlation between MetaLabs and I-Components is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding MetaLabs Co and i Components Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on i Components and MetaLabs 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 MetaLabs Co are associated (or correlated) with I-Components. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of i Components has no effect on the direction of MetaLabs i.e., MetaLabs and I-Components go up and down completely randomly.

Pair Corralation between MetaLabs and I-Components

Assuming the 90 days trading horizon MetaLabs Co is expected to under-perform the I-Components. In addition to that, MetaLabs is 1.48 times more volatile than i Components Co. It trades about -0.11 of its total potential returns per unit of risk. i Components Co is currently generating about 0.09 per unit of volatility. If you would invest  432,000  in i Components Co on September 16, 2024 and sell it today you would earn a total of  38,500  from holding i Components Co or generate 8.91% return on investment over 90 days.

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

MetaLabs Co  vs.  i Components Co

MetaLabs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MetaLabs Co 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 somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

i Components

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in i Components Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, I-Components may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MetaLabs and I-Components

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

The idea behind MetaLabs Co and i Components Co 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.