Correlation Between MI Technovation and Alliance Financial

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

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

Diversification Opportunities for MI Technovation and Alliance Financial

0.61

Correlation Coefficient

MI Technovation  Alliance Financial

Poor diversification

The 3 months correlation between 5286 and Alliance is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MI Technovation Bhd and Alliance Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Financial and MI Technovation 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 MI Technovation Bhd are associated (or correlated) with Alliance Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Financial has no effect on the direction of MI Technovation i.e., MI Technovation and Alliance Financial go up and down completely randomly.

Pair Corralation between MI Technovation and Alliance Financial

Assuming the 90 days trading horizon MI Technovation Bhd is expected to under-perform the Alliance Financial. In addition to that, MI Technovation is 1.87 times more volatile than Alliance Financial Group. It trades about -0.02 of its total potential returns per unit of risk. Alliance Financial Group is currently generating about 0.16 per unit of volatility. If you would invest  368.00  in Alliance Financial Group on September 28, 2024 and sell it today you would earn a total of  118.00  from holding Alliance Financial Group or generate 32.07% return on investment over 90 days.

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

MI Technovation Bhd  vs.  Alliance Financial Group

MI Technovation Bhd

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MI Technovation Bhd are ranked lower than 12 (%) 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.

Alliance Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Alliance Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MI Technovation and Alliance Financial

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

The idea behind MI Technovation Bhd and Alliance Financial Group 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.