Correlation Between ABL and MWAT

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

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

Diversification Opportunities for ABL and MWAT

0.0

Correlation Coefficient

ABL  MWAT

Pay attention - limited upside

The 3 months correlation between ABL and MWAT is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ABL and MWAT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MWAT and ABL 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 ABL are associated (or correlated) with MWAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MWAT has no effect on the direction of ABL i.e., ABL and MWAT go up and down completely randomly.

Pair Corralation between ABL and MWAT

If you would invest  0.43  in MWAT on January 18, 2024 and sell it today you would earn a total of  0.00  from holding MWAT or generate 0.0% return on investment over 90 days.

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

ABL  vs.  MWAT

ABL

Risk-Adjusted Performance

0 of 100

Very Weak

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

MWAT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ABL and MWAT

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

The idea behind ABL and MWAT 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.