Correlation Between Display Tech and Mgame Corp

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

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

Diversification Opportunities for Display Tech and Mgame Corp

0.04

Correlation Coefficient

Display Tech  Mgame Corp

Significant diversification

The 3 months correlation between Display and Mgame is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Display Tech Co and Mgame Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mgame Corp and Display 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 Display Tech Co are associated (or correlated) with Mgame Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mgame Corp has no effect on the direction of Display Tech i.e., Display Tech and Mgame Corp go up and down completely randomly.

Pair Corralation between Display Tech and Mgame Corp

Assuming the 90 days trading horizon Display Tech Co is expected to generate 1.11 times more return on investment than Mgame Corp. However, Display Tech is 1.11 times more volatile than Mgame Corp. It trades about 0.02 of its potential returns per unit of risk. Mgame Corp is currently generating about -0.09 per unit of risk. If you would invest  288,500  in Display Tech Co on December 24, 2024 and sell it today you would earn a total of  3,500  from holding Display Tech Co or generate 1.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Display Tech Co  vs.  Mgame Corp

Display Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Display Tech Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Display Tech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mgame Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mgame Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Display Tech and Mgame Corp

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

The idea behind Display Tech Co and Mgame Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.