Correlation Between Magnora ASA and PCI PAL

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

By analyzing existing cross correlation between Magnora ASA and PCI PAL PLC, you can compare the effects of market volatilities on Magnora ASA and PCI PAL 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 Magnora ASA with a short position of PCI PAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnora ASA and PCI PAL.

Diversification Opportunities for Magnora ASA and PCI PAL

0.44

Correlation Coefficient

Magnora ASA  PCI PAL

Very weak diversification

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

Pair Corralation between Magnora ASA and PCI PAL

Assuming the 90 days trading horizon Magnora ASA is expected to generate 1.63 times more return on investment than PCI PAL. However, Magnora ASA is 1.63 times more volatile than PCI PAL PLC. It trades about 0.04 of its potential returns per unit of risk. PCI PAL PLC is currently generating about 0.03 per unit of risk. If you would invest  1,785  in Magnora ASA on September 23, 2024 and sell it today you would earn a total of  975.00  from holding Magnora ASA or generate 54.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.8%
Values	Daily Returns

Magnora ASA  vs.  PCI PAL PLC

Magnora ASA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnora ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Magnora ASA unveiled solid returns over the last few months and may actually be approaching a breakup point.

PCI PAL PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PCI PAL PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, PCI PAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnora ASA and PCI PAL

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

The idea behind Magnora ASA and PCI PAL PLC 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.

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 the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.