Correlation Between SFP Tech and Magni Tech

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

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

Diversification Opportunities for SFP Tech and Magni Tech

0.2

Correlation Coefficient

SFP Tech  Magni Tech

Modest diversification

The 3 months correlation between SFP and Magni is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SFP Tech Holdings and Magni Tech Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magni Tech Industries and SFP Tech 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 SFP Tech Holdings are associated (or correlated) with Magni Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magni Tech Industries has no effect on the direction of SFP Tech i.e., SFP Tech and Magni Tech go up and down completely randomly.

Pair Corralation between SFP Tech and Magni Tech

Assuming the 90 days trading horizon SFP Tech Holdings is expected to under-perform the Magni Tech. In addition to that, SFP Tech is 1.09 times more volatile than Magni Tech Industries. It trades about -0.08 of its total potential returns per unit of risk. Magni Tech Industries is currently generating about 0.0 per unit of volatility. If you would invest  251.00  in Magni Tech Industries on November 20, 2024 and sell it today you would lose (4.00) from holding Magni Tech Industries or give up 1.59% of portfolio value over 90 days.

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

SFP Tech Holdings  vs.  Magni Tech Industries

SFP Tech Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days SFP Tech Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Magni Tech Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magni Tech Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Magni Tech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SFP Tech and Magni Tech

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

The idea behind SFP Tech Holdings and Magni Tech Industries 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.