Correlation Between Magni Tech and Sunway Construction

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

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

Diversification Opportunities for Magni Tech and Sunway Construction

0.33

Correlation Coefficient

Magni Tech  Sunway Construction

Weak diversification

The 3 months correlation between Magni and Sunway is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Magni Tech Industries and Sunway Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunway Construction and Magni Tech 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 Magni Tech Industries are associated (or correlated) with Sunway Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunway Construction has no effect on the direction of Magni Tech i.e., Magni Tech and Sunway Construction go up and down completely randomly.

Pair Corralation between Magni Tech and Sunway Construction

Assuming the 90 days trading horizon Magni Tech Industries is expected to generate 0.8 times more return on investment than Sunway Construction. However, Magni Tech Industries is 1.25 times less risky than Sunway Construction. It trades about 0.16 of its potential returns per unit of risk. Sunway Construction Group is currently generating about 0.05 per unit of risk. If you would invest  226.00  in Magni Tech Industries on September 3, 2024 and sell it today you would earn a total of  44.00  from holding Magni Tech Industries or generate 19.47% return on investment over 90 days.

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

Magni Tech Industries  vs.  Sunway Construction Group

Magni Tech Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magni Tech Industries are ranked lower than 12 (%) 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.

Sunway Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sunway Construction Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Sunway Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Magni Tech and Sunway Construction

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

The idea behind Magni Tech Industries and Sunway Construction 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.