Correlation Between MITECH CoLtd and Design

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

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

Diversification Opportunities for MITECH CoLtd and Design

0.37

Correlation Coefficient

MITECH CoLtd  Design

Weak diversification

The 3 months correlation between MITECH and Design is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding MITECH CoLtd and Design Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design and MITECH CoLtd 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 MITECH CoLtd are associated (or correlated) with Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design has no effect on the direction of MITECH CoLtd i.e., MITECH CoLtd and Design go up and down completely randomly.

Pair Corralation between MITECH CoLtd and Design

Assuming the 90 days trading horizon MITECH CoLtd is expected to generate 1.01 times less return on investment than Design. But when comparing it to its historical volatility, MITECH CoLtd is 3.43 times less risky than Design. It trades about 0.02 of its potential returns per unit of risk. Design Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  113,600  in Design Co on September 23, 2024 and sell it today you would lose (43,800) from holding Design Co or give up 38.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

MITECH CoLtd  vs.  Design Co

MITECH CoLtd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MITECH CoLtd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MITECH CoLtd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Design

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Design Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Design sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MITECH CoLtd and Design

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

The idea behind MITECH CoLtd and Design Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.