Correlation Between MPI and Adata Technology

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

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

Diversification Opportunities for MPI and Adata Technology

-0.68

Correlation Coefficient

MPI  Adata Technology

Excellent diversification

The 3 months correlation between MPI and Adata is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding MPI Corp. and Adata Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adata Technology and MPI 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 MPI Corporation are associated (or correlated) with Adata Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adata Technology has no effect on the direction of MPI i.e., MPI and Adata Technology go up and down completely randomly.

Pair Corralation between MPI and Adata Technology

Assuming the 90 days trading horizon MPI Corporation is expected to generate 2.44 times more return on investment than Adata Technology. However, MPI is 2.44 times more volatile than Adata Technology Co. It trades about 0.21 of its potential returns per unit of risk. Adata Technology Co is currently generating about -0.27 per unit of risk. If you would invest  76,000  in MPI Corporation on September 28, 2024 and sell it today you would earn a total of  12,900  from holding MPI Corporation or generate 16.97% return on investment over 90 days.

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

MPI Corp.  vs.  Adata Technology Co

MPI Corporation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MPI Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MPI showed solid returns over the last few months and may actually be approaching a breakup point.

Adata Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adata Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with MPI and Adata Technology

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

The idea behind MPI Corporation and Adata 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.

Check out your portfolio center.

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.