Correlation Between MET and CLOAK

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

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

Diversification Opportunities for MET and CLOAK

0.43

Correlation Coefficient

MET  CLOAK

Very weak diversification

The 3 months correlation between MET and CLOAK is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding MET and CLOAK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLOAK and MET 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 MET are associated (or correlated) with CLOAK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLOAK has no effect on the direction of MET i.e., MET and CLOAK go up and down completely randomly.

Pair Corralation between MET and CLOAK

If you would invest  41.00  in MET on September 2, 2024 and sell it today you would earn a total of  17.00  from holding MET or generate 41.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.52%
Values	Daily Returns

MET  vs.  CLOAK

MET

Risk-Adjusted Performance

9 of 100

OK

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

CLOAK

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MET and CLOAK

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

The idea behind MET and CLOAK 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 Transaction History module to view history of all your transactions and understand their impact on performance.