Correlation Between Ma Kuang and STL Technology

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

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

Diversification Opportunities for Ma Kuang and STL Technology

-0.35

Correlation Coefficient

Ma Kuang  STL Technology

Very good diversification

The 3 months correlation between 4139 and STL is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ma Kuang Healthcare and STL Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STL Technology and Ma Kuang 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 Ma Kuang Healthcare are associated (or correlated) with STL Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STL Technology has no effect on the direction of Ma Kuang i.e., Ma Kuang and STL Technology go up and down completely randomly.

Pair Corralation between Ma Kuang and STL Technology

Assuming the 90 days trading horizon Ma Kuang Healthcare is expected to under-perform the STL Technology. But the stock apears to be less risky and, when comparing its historical volatility, Ma Kuang Healthcare is 3.06 times less risky than STL Technology. The stock trades about -0.06 of its potential returns per unit of risk. The STL Technology Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6,260  in STL Technology Co on December 21, 2024 and sell it today you would earn a total of  2,770  from holding STL Technology Co or generate 44.25% return on investment over 90 days.

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

Ma Kuang Healthcare  vs.  STL Technology Co

Ma Kuang Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ma Kuang Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ma Kuang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

STL Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STL Technology Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, STL Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ma Kuang and STL Technology

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

The idea behind Ma Kuang Healthcare and STL Technology 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.