Correlation Between Magna Polonia and Dom Development

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

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

Diversification Opportunities for Magna Polonia and Dom Development

-0.06

Correlation Coefficient

Magna Polonia  Dom Development

Good diversification

The 3 months correlation between Magna and Dom is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Magna Polonia SA and Dom Development SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dom Development SA and Magna Polonia 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 Magna Polonia SA are associated (or correlated) with Dom Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dom Development SA has no effect on the direction of Magna Polonia i.e., Magna Polonia and Dom Development go up and down completely randomly.

Pair Corralation between Magna Polonia and Dom Development

Assuming the 90 days trading horizon Magna Polonia SA is expected to under-perform the Dom Development. In addition to that, Magna Polonia is 1.74 times more volatile than Dom Development SA. It trades about 0.0 of its total potential returns per unit of risk. Dom Development SA is currently generating about 0.1 per unit of volatility. If you would invest  8,552  in Dom Development SA on October 25, 2024 and sell it today you would earn a total of  10,708  from holding Dom Development SA or generate 125.21% return on investment over 90 days.

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

Magna Polonia SA  vs.  Dom Development SA

Magna Polonia SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magna Polonia SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Magna Polonia is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Dom Development SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dom Development SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Dom Development is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Magna Polonia and Dom Development

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

The idea behind Magna Polonia SA and Dom Development SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.