Correlation Between EA Technique and MI Technovation

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

By analyzing existing cross correlation between EA Technique M and MI Technovation Bhd, you can compare the effects of market volatilities on EA Technique and MI Technovation 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 EA Technique with a short position of MI Technovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of EA Technique and MI Technovation.

Diversification Opportunities for EA Technique and MI Technovation

-0.35

Correlation Coefficient

EA Technique  MI Technovation

Very good diversification

The 3 months correlation between 5259 and 5286 is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding EA Technique M and MI Technovation Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Technovation Bhd and EA Technique 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 EA Technique M are associated (or correlated) with MI Technovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MI Technovation Bhd has no effect on the direction of EA Technique i.e., EA Technique and MI Technovation go up and down completely randomly.

Pair Corralation between EA Technique and MI Technovation

Assuming the 90 days trading horizon EA Technique is expected to generate 3.35 times less return on investment than MI Technovation. But when comparing it to its historical volatility, EA Technique M is 1.53 times less risky than MI Technovation. It trades about 0.04 of its potential returns per unit of risk. MI Technovation Bhd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  192.00  in MI Technovation Bhd on September 4, 2024 and sell it today you would earn a total of  25.00  from holding MI Technovation Bhd or generate 13.02% return on investment over 90 days.

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

EA Technique M  vs.  MI Technovation Bhd

EA Technique M

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EA Technique M are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, EA Technique is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

MI Technovation Bhd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MI Technovation Bhd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, MI Technovation disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EA Technique and MI Technovation

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

The idea behind EA Technique M and MI Technovation Bhd 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.