Correlation Between Armada Mercantile and Magic Empire

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

By analyzing existing cross correlation between Armada Mercantile and Magic Empire Global, you can compare the effects of market volatilities on Armada Mercantile and Magic Empire 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 Armada Mercantile with a short position of Magic Empire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Mercantile and Magic Empire.

Diversification Opportunities for Armada Mercantile and Magic Empire

-0.04

Correlation Coefficient

Armada Mercantile  Magic Empire

Good diversification

The 3 months correlation between Armada and Magic is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Armada Mercantile and Magic Empire Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magic Empire Global and Armada Mercantile 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 Armada Mercantile are associated (or correlated) with Magic Empire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magic Empire Global has no effect on the direction of Armada Mercantile i.e., Armada Mercantile and Magic Empire go up and down completely randomly.

Pair Corralation between Armada Mercantile and Magic Empire

Assuming the 90 days horizon Armada Mercantile is expected to generate 1.98 times more return on investment than Magic Empire. However, Armada Mercantile is 1.98 times more volatile than Magic Empire Global. It trades about 0.05 of its potential returns per unit of risk. Magic Empire Global is currently generating about -0.04 per unit of risk. If you would invest  30.00  in Armada Mercantile on December 28, 2024 and sell it today you would lose (7.00) from holding Armada Mercantile or give up 23.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Armada Mercantile  vs.  Magic Empire Global

Armada Mercantile

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Armada Mercantile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Armada Mercantile reported solid returns over the last few months and may actually be approaching a breakup point.

Magic Empire Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magic Empire Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Armada Mercantile and Magic Empire

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

The idea behind Armada Mercantile and Magic Empire Global 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.