Correlation Between Volaris and Mattel

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

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

Diversification Opportunities for Volaris and Mattel

-0.14

Correlation Coefficient

Volaris  Mattel

Good diversification

The 3 months correlation between Volaris and Mattel is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Volaris and Mattel Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mattel Inc and Volaris 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 Volaris are associated (or correlated) with Mattel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mattel Inc has no effect on the direction of Volaris i.e., Volaris and Mattel go up and down completely randomly.

Pair Corralation between Volaris and Mattel

Given the investment horizon of 90 days Volaris is expected to generate 1.08 times more return on investment than Mattel. However, Volaris is 1.08 times more volatile than Mattel Inc. It trades about 0.18 of its potential returns per unit of risk. Mattel Inc is currently generating about -0.05 per unit of risk. If you would invest  629.00  in Volaris on September 24, 2024 and sell it today you would earn a total of  166.00  from holding Volaris or generate 26.39% return on investment over 90 days.

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

Volaris  vs.  Mattel Inc

Volaris

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volaris are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Volaris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Volaris and Mattel

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

The idea behind Volaris and Mattel Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.