Correlation Between Montauk Renewables and Equinix

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

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

Diversification Opportunities for Montauk Renewables and Equinix

-0.72

Correlation Coefficient

Montauk Renewables  Equinix

Pay attention - limited upside

The 3 months correlation between Montauk and Equinix is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Equinix go up and down completely randomly.

Pair Corralation between Montauk Renewables and Equinix

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Equinix. In addition to that, Montauk Renewables is 3.41 times more volatile than Equinix. It trades about -0.08 of its total potential returns per unit of risk. Equinix is currently generating about 0.07 per unit of volatility. If you would invest  87,776  in Equinix on September 21, 2024 and sell it today you would earn a total of  4,381  from holding Equinix or generate 4.99% return on investment over 90 days.

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

Montauk Renewables  vs.  Equinix

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Equinix

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Equinix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Montauk Renewables and Equinix

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

The idea behind Montauk Renewables and Equinix 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.