Correlation Between Donnelley Financial and Magic Empire

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

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

Diversification Opportunities for Donnelley Financial and Magic Empire

-0.13

Correlation Coefficient

Donnelley Financial  Magic Empire

Good diversification

The 3 months correlation between Donnelley and Magic is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Donnelley Financial Solutions 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 Donnelley Financial 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 Donnelley Financial Solutions 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 Donnelley Financial i.e., Donnelley Financial and Magic Empire go up and down completely randomly.

Pair Corralation between Donnelley Financial and Magic Empire

Given the investment horizon of 90 days Donnelley Financial Solutions is expected to under-perform the Magic Empire. But the stock apears to be less risky and, when comparing its historical volatility, Donnelley Financial Solutions is 2.9 times less risky than Magic Empire. The stock trades about -0.07 of its potential returns per unit of risk. The Magic Empire Global is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  46.00  in Magic Empire Global on August 30, 2024 and sell it today you would earn a total of  6.00  from holding Magic Empire Global or generate 13.04% return on investment over 90 days.

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

Donnelley Financial Solutions  vs.  Magic Empire Global

Donnelley Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Donnelley Financial Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting 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.

Magic Empire Global

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Empire Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Magic Empire disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Donnelley Financial and Magic Empire

The main advantage of trading using opposite Donnelley Financial and Magic Empire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donnelley Financial 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 Donnelley Financial Solutions 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.