Correlation Between Energy Resources and MA Financial

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

By analyzing existing cross correlation between Energy Resources and MA Financial Group, you can compare the effects of market volatilities on Energy Resources and MA Financial 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 Energy Resources with a short position of MA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Resources and MA Financial.

Diversification Opportunities for Energy Resources and MA Financial

-0.77

Correlation Coefficient

Energy Resources  MA Financial

Pay attention - limited upside

The 3 months correlation between Energy and MAF is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources and MA Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MA Financial Group and Energy Resources 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 Energy Resources are associated (or correlated) with MA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MA Financial Group has no effect on the direction of Energy Resources i.e., Energy Resources and MA Financial go up and down completely randomly.

Pair Corralation between Energy Resources and MA Financial

Assuming the 90 days trading horizon Energy Resources is expected to generate 15.22 times more return on investment than MA Financial. However, Energy Resources is 15.22 times more volatile than MA Financial Group. It trades about 0.11 of its potential returns per unit of risk. MA Financial Group is currently generating about 0.15 per unit of risk. If you would invest  0.50  in Energy Resources on August 31, 2024 and sell it today you would lose (0.20) from holding Energy Resources or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Energy Resources  vs.  MA Financial Group

Energy Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Energy Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

MA Financial Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MA Financial Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MA Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Resources and MA Financial

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

The idea behind Energy Resources and MA Financial Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.