Correlation Between Currency Exchange and Maxim Power

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

By analyzing existing cross correlation between Currency Exchange International and Maxim Power Corp, you can compare the effects of market volatilities on Currency Exchange and Maxim Power 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 Currency Exchange with a short position of Maxim Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Currency Exchange and Maxim Power.

Diversification Opportunities for Currency Exchange and Maxim Power

-0.83

Correlation Coefficient

Currency Exchange  Maxim Power

Pay attention - limited upside

The 3 months correlation between Currency and Maxim is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Currency Exchange Internationa and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp and Currency Exchange 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 Currency Exchange International are associated (or correlated) with Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of Currency Exchange i.e., Currency Exchange and Maxim Power go up and down completely randomly.

Pair Corralation between Currency Exchange and Maxim Power

Assuming the 90 days trading horizon Currency Exchange International is expected to under-perform the Maxim Power. But the stock apears to be less risky and, when comparing its historical volatility, Currency Exchange International is 2.23 times less risky than Maxim Power. The stock trades about -0.01 of its potential returns per unit of risk. The Maxim Power Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  514.00  in Maxim Power Corp on October 22, 2024 and sell it today you would earn a total of  78.00  from holding Maxim Power Corp or generate 15.18% return on investment over 90 days.

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

Currency Exchange Internationa  vs.  Maxim Power Corp

Currency Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Currency Exchange International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Maxim Power Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Maxim Power Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Maxim Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Currency Exchange and Maxim Power

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

The idea behind Currency Exchange International and Maxim Power Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.