Correlation Between MASSACHUSETTS and Pinterest

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

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

Diversification Opportunities for MASSACHUSETTS and Pinterest

0.1

Correlation Coefficient

MASSACHUSETTS  Pinterest

Average diversification

The 3 months correlation between MASSACHUSETTS and Pinterest is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding MASSACHUSETTS INST TECHNOLOGY and Pinterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinterest and MASSACHUSETTS 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 MASSACHUSETTS INST TECHNOLOGY are associated (or correlated) with Pinterest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinterest has no effect on the direction of MASSACHUSETTS i.e., MASSACHUSETTS and Pinterest go up and down completely randomly.

Pair Corralation between MASSACHUSETTS and Pinterest

Assuming the 90 days trading horizon MASSACHUSETTS INST TECHNOLOGY is expected to generate 0.81 times more return on investment than Pinterest. However, MASSACHUSETTS INST TECHNOLOGY is 1.23 times less risky than Pinterest. It trades about 0.02 of its potential returns per unit of risk. Pinterest is currently generating about -0.03 per unit of risk. If you would invest  9,539  in MASSACHUSETTS INST TECHNOLOGY on September 25, 2024 and sell it today you would earn a total of  141.00  from holding MASSACHUSETTS INST TECHNOLOGY or generate 1.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

MASSACHUSETTS INST TECHNOLOGY  vs.  Pinterest

MASSACHUSETTS INST

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MASSACHUSETTS INST TECHNOLOGY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MASSACHUSETTS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pinterest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinterest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pinterest is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MASSACHUSETTS and Pinterest

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

The idea behind MASSACHUSETTS INST TECHNOLOGY and Pinterest 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.