Correlation Between Dagang Nexchange and Magni Tech

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

By analyzing existing cross correlation between Dagang Nexchange Bhd and Magni Tech Industries, you can compare the effects of market volatilities on Dagang Nexchange and Magni Tech 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 Dagang Nexchange with a short position of Magni Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dagang Nexchange and Magni Tech.

Diversification Opportunities for Dagang Nexchange and Magni Tech

0.09

Correlation Coefficient

Dagang Nexchange  Magni Tech

Significant diversification

The 3 months correlation between Dagang and Magni is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dagang Nexchange Bhd and Magni Tech Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magni Tech Industries and Dagang Nexchange 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 Dagang Nexchange Bhd are associated (or correlated) with Magni Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magni Tech Industries has no effect on the direction of Dagang Nexchange i.e., Dagang Nexchange and Magni Tech go up and down completely randomly.

Pair Corralation between Dagang Nexchange and Magni Tech

Assuming the 90 days trading horizon Dagang Nexchange Bhd is expected to under-perform the Magni Tech. In addition to that, Dagang Nexchange is 1.86 times more volatile than Magni Tech Industries. It trades about -0.01 of its total potential returns per unit of risk. Magni Tech Industries is currently generating about 0.06 per unit of volatility. If you would invest  169.00  in Magni Tech Industries on September 29, 2024 and sell it today you would earn a total of  81.00  from holding Magni Tech Industries or generate 47.93% return on investment over 90 days.

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

Dagang Nexchange Bhd  vs.  Magni Tech Industries

Dagang Nexchange Bhd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dagang Nexchange Bhd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Dagang Nexchange disclosed solid returns over the last few months and may actually be approaching a breakup point.

Magni Tech Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magni Tech Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Magni Tech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dagang Nexchange and Magni Tech

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

The idea behind Dagang Nexchange Bhd and Magni Tech Industries 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.