Correlation Between MTV and Centrifuge

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

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

Diversification Opportunities for MTV and Centrifuge

0.21

Correlation Coefficient

MTV  Centrifuge

Modest diversification

The 3 months correlation between MTV and Centrifuge is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding MTV and Centrifuge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrifuge and MTV 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 MTV are associated (or correlated) with Centrifuge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrifuge has no effect on the direction of MTV i.e., MTV and Centrifuge go up and down completely randomly.

Pair Corralation between MTV and Centrifuge

Assuming the 90 days trading horizon MTV is expected to under-perform the Centrifuge. In addition to that, MTV is 1.06 times more volatile than Centrifuge. It trades about -0.02 of its total potential returns per unit of risk. Centrifuge is currently generating about 0.05 per unit of volatility. If you would invest  64.00  in Centrifuge on January 28, 2024 and sell it today you would earn a total of  4.00  from holding Centrifuge or generate 6.25% return on investment over 90 days.

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

MTV  vs.  Centrifuge

MTV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Centrifuge

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centrifuge are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Centrifuge exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTV and Centrifuge

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

The idea behind MTV and Centrifuge 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.