Correlation Between AMTD Digital and Magic Empire

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

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

Diversification Opportunities for AMTD Digital and Magic Empire

0.7

Correlation Coefficient

AMTD Digital  Magic Empire

Poor diversification

The 3 months correlation between AMTD and Magic is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AMTD Digital 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 AMTD Digital 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 AMTD Digital 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 AMTD Digital i.e., AMTD Digital and Magic Empire go up and down completely randomly.

Pair Corralation between AMTD Digital and Magic Empire

Considering the 90-day investment horizon AMTD Digital is expected to generate 1.21 times less return on investment than Magic Empire. In addition to that, AMTD Digital is 1.24 times more volatile than Magic Empire Global. It trades about 0.05 of its total potential returns per unit of risk. Magic Empire Global is currently generating about 0.08 per unit of volatility. If you would invest  44.00  in Magic Empire Global on September 3, 2024 and sell it today you would earn a total of  9.00  from holding Magic Empire Global or generate 20.45% return on investment over 90 days.

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

AMTD Digital  vs.  Magic Empire Global

AMTD Digital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMTD Digital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking signals, AMTD Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Magic Empire Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Empire Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak 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 AMTD Digital and Magic Empire

The main advantage of trading using opposite AMTD Digital and Magic Empire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMTD Digital 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 AMTD Digital 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.