Correlation Between MTN and NEPI Rockcastle

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

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

Diversification Opportunities for MTN and NEPI Rockcastle

0.74

Correlation Coefficient

MTN  NEPI Rockcastle

Poor diversification

The 3 months correlation between MTN and NEPI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group and NEPI Rockcastle PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEPI Rockcastle PLC and MTN 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 MTN Group are associated (or correlated) with NEPI Rockcastle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEPI Rockcastle PLC has no effect on the direction of MTN i.e., MTN and NEPI Rockcastle go up and down completely randomly.

Pair Corralation between MTN and NEPI Rockcastle

Assuming the 90 days trading horizon MTN Group is expected to under-perform the NEPI Rockcastle. In addition to that, MTN is 1.45 times more volatile than NEPI Rockcastle PLC. It trades about -0.09 of its total potential returns per unit of risk. NEPI Rockcastle PLC is currently generating about -0.04 per unit of volatility. If you would invest  1,432,379  in NEPI Rockcastle PLC on September 1, 2024 and sell it today you would lose (34,779) from holding NEPI Rockcastle PLC or give up 2.43% of portfolio value over 90 days.

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

MTN Group  vs.  NEPI Rockcastle PLC

MTN Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

NEPI Rockcastle PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MTN and NEPI Rockcastle

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

The idea behind MTN Group and NEPI Rockcastle PLC 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.