Correlation Between Montauk Renewables and Otter Tail

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

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

Diversification Opportunities for Montauk Renewables and Otter Tail

-0.24

Correlation Coefficient

Montauk Renewables  Otter Tail

Very good diversification

The 3 months correlation between Montauk and Otter is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Otter Tail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otter Tail 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 Otter Tail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otter Tail has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Otter Tail go up and down completely randomly.

Pair Corralation between Montauk Renewables and Otter Tail

Given the investment horizon of 90 days Montauk Renewables is expected to generate 2.5 times more return on investment than Otter Tail. However, Montauk Renewables is 2.5 times more volatile than Otter Tail. It trades about 0.03 of its potential returns per unit of risk. Otter Tail is currently generating about 0.01 per unit of risk. If you would invest  432.00  in Montauk Renewables on September 2, 2024 and sell it today you would earn a total of  10.00  from holding Montauk Renewables or generate 2.31% return on investment over 90 days.

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

Montauk Renewables  vs.  Otter Tail

Montauk Renewables

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Montauk Renewables are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Montauk Renewables may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Otter Tail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otter Tail has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Otter Tail is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Montauk Renewables and Otter Tail

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

The idea behind Montauk Renewables and Otter Tail 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.