Correlation Between Magni Tech and Kossan Rubber

Can any of the company-specific risk be diversified away by investing in both Magni Tech and Kossan Rubber 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 Kossan Rubber 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 Kossan Rubber Industries, you can compare the effects of market volatilities on Magni Tech and Kossan Rubber 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 Kossan Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magni Tech and Kossan Rubber.

Diversification Opportunities for Magni Tech and Kossan Rubber

0.6

Correlation Coefficient

Magni Tech  Kossan Rubber

Poor diversification

The 3 months correlation between Magni and Kossan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Magni Tech Industries and Kossan Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kossan Rubber Industries 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 Kossan Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kossan Rubber Industries has no effect on the direction of Magni Tech i.e., Magni Tech and Kossan Rubber go up and down completely randomly.

Pair Corralation between Magni Tech and Kossan Rubber

Assuming the 90 days trading horizon Magni Tech is expected to generate 1.11 times less return on investment than Kossan Rubber. But when comparing it to its historical volatility, Magni Tech Industries is 1.61 times less risky than Kossan Rubber. It trades about 0.09 of its potential returns per unit of risk. Kossan Rubber Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  199.00  in Kossan Rubber Industries on October 8, 2024 and sell it today you would earn a total of  79.00  from holding Kossan Rubber Industries or generate 39.7% return on investment over 90 days.

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

Magni Tech Industries  vs.  Kossan Rubber Industries

Magni Tech Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magni Tech Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Magni Tech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kossan Rubber Industries

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kossan Rubber Industries are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kossan Rubber disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magni Tech and Kossan Rubber

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

The idea behind Magni Tech Industries and Kossan Rubber 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..