Correlation Between MAGNUM DCORP and ZIJIN MINH

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

By analyzing existing cross correlation between MAGNUM DCORP INC and ZIJIN MINH UNSPADR20, you can compare the effects of market volatilities on MAGNUM DCORP and ZIJIN MINH 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 MAGNUM DCORP with a short position of ZIJIN MINH. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGNUM DCORP and ZIJIN MINH.

Diversification Opportunities for MAGNUM DCORP and ZIJIN MINH

0.07

Correlation Coefficient

MAGNUM DCORP  ZIJIN MINH

Significant diversification

The 3 months correlation between MAGNUM and ZIJIN is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding MAGNUM DCORP INC and ZIJIN MINH UNSPADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZIJIN MINH UNSPADR20 and MAGNUM DCORP 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 MAGNUM DCORP INC are associated (or correlated) with ZIJIN MINH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZIJIN MINH UNSPADR20 has no effect on the direction of MAGNUM DCORP i.e., MAGNUM DCORP and ZIJIN MINH go up and down completely randomly.

Pair Corralation between MAGNUM DCORP and ZIJIN MINH

Assuming the 90 days trading horizon MAGNUM DCORP INC is expected to generate 7.92 times more return on investment than ZIJIN MINH. However, MAGNUM DCORP is 7.92 times more volatile than ZIJIN MINH UNSPADR20. It trades about 0.07 of its potential returns per unit of risk. ZIJIN MINH UNSPADR20 is currently generating about -0.07 per unit of risk. If you would invest  5.25  in MAGNUM DCORP INC on September 22, 2024 and sell it today you would lose (2.04) from holding MAGNUM DCORP INC or give up 38.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

MAGNUM DCORP INC  vs.  ZIJIN MINH UNSPADR20

MAGNUM DCORP INC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MAGNUM DCORP INC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, MAGNUM DCORP reported solid returns over the last few months and may actually be approaching a breakup point.

ZIJIN MINH UNSPADR20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZIJIN MINH UNSPADR20 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ZIJIN MINH is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MAGNUM DCORP and ZIJIN MINH

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

The idea behind MAGNUM DCORP INC and ZIJIN MINH UNSPADR20 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.