Correlation Between MTL and HIT

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

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

Diversification Opportunities for MTL and HIT

-0.01

Correlation Coefficient

MTL  HIT

Good diversification

The 3 months correlation between MTL and HIT is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MTL and HIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HIT and MTL 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 MTL are associated (or correlated) with HIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HIT has no effect on the direction of MTL i.e., MTL and HIT go up and down completely randomly.

Pair Corralation between MTL and HIT

Assuming the 90 days trading horizon MTL is expected to generate 0.16 times more return on investment than HIT. However, MTL is 6.18 times less risky than HIT. It trades about 0.11 of its potential returns per unit of risk. HIT is currently generating about -0.05 per unit of risk. If you would invest  76.00  in MTL on January 19, 2025 and sell it today you would earn a total of  7.00  from holding MTL or generate 9.21% return on investment over 90 days.

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

MTL  vs.  HIT

MTL

Risk-Adjusted Performance

Very Weak

Over the last 90 days MTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's essential indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for MTL shareholders.

HIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, HIT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTL and HIT

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

The idea behind MTL and HIT 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.