Correlation Between MClean Technologies and Alliance Financial

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

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

Diversification Opportunities for MClean Technologies and Alliance Financial

0.44

Correlation Coefficient

MClean Technologies  Alliance Financial

Very weak diversification

The 3 months correlation between MClean and Alliance is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding MClean Technologies Bhd and Alliance Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Financial and MClean Technologies 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 MClean Technologies Bhd are associated (or correlated) with Alliance Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Financial has no effect on the direction of MClean Technologies i.e., MClean Technologies and Alliance Financial go up and down completely randomly.

Pair Corralation between MClean Technologies and Alliance Financial

Assuming the 90 days trading horizon MClean Technologies Bhd is expected to generate 3.01 times more return on investment than Alliance Financial. However, MClean Technologies is 3.01 times more volatile than Alliance Financial Group. It trades about 0.07 of its potential returns per unit of risk. Alliance Financial Group is currently generating about 0.18 per unit of risk. If you would invest  26.00  in MClean Technologies Bhd on October 26, 2024 and sell it today you would earn a total of  4.00  from holding MClean Technologies Bhd or generate 15.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

MClean Technologies Bhd  vs.  Alliance Financial Group

MClean Technologies Bhd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MClean Technologies Bhd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, MClean Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Alliance Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Alliance Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MClean Technologies and Alliance Financial

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

The idea behind MClean Technologies Bhd and Alliance Financial Group 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.