Correlation Between Press Metal and Magni Tech

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

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

Diversification Opportunities for Press Metal and Magni Tech

0.22

Correlation Coefficient

Press Metal  Magni Tech

Modest diversification

The 3 months correlation between Press and Magni is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Press Metal Bhd 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 Press Metal 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 Press Metal Bhd 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 Press Metal i.e., Press Metal and Magni Tech go up and down completely randomly.

Pair Corralation between Press Metal and Magni Tech

Assuming the 90 days trading horizon Press Metal is expected to generate 1.69 times less return on investment than Magni Tech. In addition to that, Press Metal is 1.78 times more volatile than Magni Tech Industries. It trades about 0.07 of its total potential returns per unit of risk. Magni Tech Industries is currently generating about 0.2 per unit of volatility. If you would invest  251.00  in Magni Tech Industries on September 12, 2024 and sell it today you would earn a total of  37.00  from holding Magni Tech Industries or generate 14.74% return on investment over 90 days.

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

Press Metal Bhd  vs.  Magni Tech Industries

Press Metal Bhd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Press Metal Bhd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Press Metal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Magni Tech Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magni Tech Industries are ranked lower than 15 (%) 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 Press Metal and Magni Tech

The main advantage of trading using opposite Press Metal and Magni Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Press Metal 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 Press Metal Bhd 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.