Correlation Between HomeChoice Investments and MTN

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

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

Diversification Opportunities for HomeChoice Investments and MTN

0.11

Correlation Coefficient

HomeChoice Investments  MTN

Average diversification

The 3 months correlation between HomeChoice and MTN is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and MTN Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group and HomeChoice Investments 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 HomeChoice Investments are associated (or correlated) with MTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of HomeChoice Investments i.e., HomeChoice Investments and MTN go up and down completely randomly.

Pair Corralation between HomeChoice Investments and MTN

Assuming the 90 days trading horizon HomeChoice Investments is expected to under-perform the MTN. In addition to that, HomeChoice Investments is 2.28 times more volatile than MTN Group. It trades about -0.05 of its total potential returns per unit of risk. MTN Group is currently generating about -0.06 per unit of volatility. If you would invest  861,000  in MTN Group on September 3, 2024 and sell it today you would lose (46,000) from holding MTN Group or give up 5.34% of portfolio value over 90 days.

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

HomeChoice Investments  vs.  MTN Group

HomeChoice Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeChoice Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

MTN Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MTN is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HomeChoice Investments and MTN

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

The idea behind HomeChoice Investments and MTN Group 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.