Correlation Between Mantle and ME

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

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

Diversification Opportunities for Mantle and ME

0.91

Correlation Coefficient

Mantle  ME

Almost no diversification

The 3 months correlation between Mantle and ME is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Mantle and ME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ME and Mantle 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 Mantle are associated (or correlated) with ME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ME has no effect on the direction of Mantle i.e., Mantle and ME go up and down completely randomly.

Pair Corralation between Mantle and ME

Assuming the 90 days trading horizon Mantle is expected to generate 1.08 times less return on investment than ME. In addition to that, Mantle is 1.36 times more volatile than ME. It trades about 0.17 of its total potential returns per unit of risk. ME is currently generating about 0.25 per unit of volatility. If you would invest  0.06  in ME on September 1, 2024 and sell it today you would earn a total of  0.04  from holding ME or generate 67.83% return on investment over 90 days.

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

Mantle  vs.  ME

Mantle

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mantle are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Mantle sustained solid returns over the last few months and may actually be approaching a breakup point.

ME

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ME are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, ME exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mantle and ME

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

The idea behind Mantle and ME 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..