Correlation Between Montauk Renewables and XWC

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Can any of the company-specific risk be diversified away by investing in both Montauk Renewables and XWC 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 Montauk Renewables and XWC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Montauk Renewables and XWC, you can compare the effects of market volatilities on Montauk Renewables and XWC 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 Montauk Renewables with a short position of XWC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montauk Renewables and XWC.

Diversification Opportunities for Montauk Renewables and XWC

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Montauk and XWC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and XWC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XWC and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with XWC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XWC has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and XWC go up and down completely randomly.

Pair Corralation between Montauk Renewables and XWC

Given the investment horizon of 90 days Montauk Renewables is expected to generate 0.18 times more return on investment than XWC. However, Montauk Renewables is 5.66 times less risky than XWC. It trades about -0.36 of its potential returns per unit of risk. XWC is currently generating about -0.13 per unit of risk. If you would invest  1,497  in Montauk Renewables on August 31, 2022 and sell it today you would lose (332.00)  from holding Montauk Renewables or give up 22.18% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Montauk Renewables  vs.  XWC

 Performance (%) 
       Timeline  
Montauk Renewables 
Montauk Performance
0 of 100
Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2022. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Montauk Price Channel

XWC 
XWC Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in XWC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XWC sustained solid returns over the last few months and may actually be approaching a breakup point.

XWC Price Channel

Montauk Renewables and XWC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Montauk Renewables and XWC

The main advantage of trading using opposite Montauk Renewables and XWC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables position performs unexpectedly, XWC 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 XWC will offset losses from the drop in XWC's long position.
Montauk Renewables vs. Sempra
The idea behind Montauk Renewables and XWC 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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Check out your portfolio center. 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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