Correlation Between Mayville Engineering and Proto Labs

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

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

Diversification Opportunities for Mayville Engineering and Proto Labs

-0.76

Correlation Coefficient

Mayville Engineering  Proto Labs

Pay attention - limited upside

The 3 months correlation between Mayville and Proto is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Mayville Engineering Co and Proto Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proto Labs and Mayville Engineering 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 Mayville Engineering Co are associated (or correlated) with Proto Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proto Labs has no effect on the direction of Mayville Engineering i.e., Mayville Engineering and Proto Labs go up and down completely randomly.

Pair Corralation between Mayville Engineering and Proto Labs

Considering the 90-day investment horizon Mayville Engineering Co is expected to under-perform the Proto Labs. But the stock apears to be less risky and, when comparing its historical volatility, Mayville Engineering Co is 1.64 times less risky than Proto Labs. The stock trades about -0.05 of its potential returns per unit of risk. The Proto Labs is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,982  in Proto Labs on August 31, 2024 and sell it today you would earn a total of  1,098  from holding Proto Labs or generate 36.82% return on investment over 90 days.

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

Mayville Engineering Co  vs.  Proto Labs

Mayville Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mayville Engineering Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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.

Proto Labs

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Proto Labs are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Proto Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mayville Engineering and Proto Labs

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

The idea behind Mayville Engineering Co and Proto Labs 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.