Correlation Between MT Bank and Gamma Communications

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

By analyzing existing cross correlation between MT Bank Corp and Gamma Communications PLC, you can compare the effects of market volatilities on MT Bank and Gamma Communications 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 MT Bank with a short position of Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and Gamma Communications.

Diversification Opportunities for MT Bank and Gamma Communications

-0.7

Correlation Coefficient

MT Bank  Gamma Communications

Excellent diversification

The 3 months correlation between 0JW2 and Gamma is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank Corp and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications PLC and MT Bank 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 MT Bank Corp are associated (or correlated) with Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of MT Bank i.e., MT Bank and Gamma Communications go up and down completely randomly.

Pair Corralation between MT Bank and Gamma Communications

Assuming the 90 days trading horizon MT Bank Corp is expected to generate 1.13 times more return on investment than Gamma Communications. However, MT Bank is 1.13 times more volatile than Gamma Communications PLC. It trades about 0.1 of its potential returns per unit of risk. Gamma Communications PLC is currently generating about 0.1 per unit of risk. If you would invest  13,390  in MT Bank Corp on September 20, 2024 and sell it today you would earn a total of  6,057  from holding MT Bank Corp or generate 45.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.0%
Values	Daily Returns

MT Bank Corp  vs.  Gamma Communications PLC

MT Bank Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MT Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gamma Communications PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with MT Bank and Gamma Communications

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

The idea behind MT Bank Corp and Gamma Communications 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.