Correlation Between Shangri La and Magni Tech

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

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

Diversification Opportunities for Shangri La and Magni Tech

-0.16

Correlation Coefficient

Shangri La  Magni Tech

Good diversification

The 3 months correlation between Shangri and Magni is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Shangri La Hotels 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 Shangri La 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 Shangri La Hotels 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 Shangri La i.e., Shangri La and Magni Tech go up and down completely randomly.

Pair Corralation between Shangri La and Magni Tech

Assuming the 90 days trading horizon Shangri La is expected to generate 7.02 times less return on investment than Magni Tech. But when comparing it to its historical volatility, Shangri La Hotels is 1.71 times less risky than Magni Tech. It trades about 0.04 of its potential returns per unit of risk. Magni Tech Industries is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  224.00  in Magni Tech Industries on September 1, 2024 and sell it today you would earn a total of  46.00  from holding Magni Tech Industries or generate 20.54% return on investment over 90 days.

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

Shangri La Hotels  vs.  Magni Tech Industries

Shangri La Hotels

Risk-Adjusted Performance

3 of 100

Insignificant

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

Magni Tech Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magni Tech Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Magni Tech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shangri La and Magni Tech

The main advantage of trading using opposite Shangri La and Magni Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shangri La 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 Shangri La Hotels 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.