Correlation Between MPI and Waffer Technology

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

By analyzing existing cross correlation between MPI Corporation and Waffer Technology Corp, you can compare the effects of market volatilities on MPI and Waffer Technology 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 MPI with a short position of Waffer Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPI and Waffer Technology.

Diversification Opportunities for MPI and Waffer Technology

-0.32

Correlation Coefficient

MPI  Waffer Technology

Very good diversification

The 3 months correlation between MPI and Waffer is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding MPI Corp. and Waffer Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waffer Technology Corp and MPI 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 MPI Corporation are associated (or correlated) with Waffer Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waffer Technology Corp has no effect on the direction of MPI i.e., MPI and Waffer Technology go up and down completely randomly.

Pair Corralation between MPI and Waffer Technology

Assuming the 90 days trading horizon MPI is expected to generate 13.61 times less return on investment than Waffer Technology. But when comparing it to its historical volatility, MPI Corporation is 23.46 times less risky than Waffer Technology. It trades about 0.13 of its potential returns per unit of risk. Waffer Technology Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9,450  in Waffer Technology Corp on September 30, 2024 and sell it today you would lose (2,550) from holding Waffer Technology Corp or give up 26.98% of portfolio value over 90 days.

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

MPI Corp.  vs.  Waffer Technology Corp

MPI Corporation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MPI Corporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MPI showed solid returns over the last few months and may actually be approaching a breakup point.

Waffer Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waffer Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Waffer Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with MPI and Waffer Technology

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

The idea behind MPI Corporation and Waffer Technology Corp 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 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.