Correlation Between Pinnacle Sherman and Malaga Financial

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

By analyzing existing cross correlation between Pinnacle Sherman Multi Strategy and Malaga Financial, you can compare the effects of market volatilities on Pinnacle Sherman and Malaga 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 Pinnacle Sherman with a short position of Malaga Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle Sherman and Malaga Financial.

Diversification Opportunities for Pinnacle Sherman and Malaga Financial

0.34

Correlation Coefficient

Pinnacle Sherman  Malaga Financial

Weak diversification

The 3 months correlation between Pinnacle and Malaga is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Sherman Multi Strateg and Malaga Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malaga Financial and Pinnacle Sherman 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 Pinnacle Sherman Multi Strategy are associated (or correlated) with Malaga Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malaga Financial has no effect on the direction of Pinnacle Sherman i.e., Pinnacle Sherman and Malaga Financial go up and down completely randomly.

Pair Corralation between Pinnacle Sherman and Malaga Financial

Assuming the 90 days horizon Pinnacle Sherman Multi Strategy is expected to generate 0.81 times more return on investment than Malaga Financial. However, Pinnacle Sherman Multi Strategy is 1.24 times less risky than Malaga Financial. It trades about -0.06 of its potential returns per unit of risk. Malaga Financial is currently generating about -0.06 per unit of risk. If you would invest  1,310  in Pinnacle Sherman Multi Strategy on December 30, 2024 and sell it today you would lose (80.00) from holding Pinnacle Sherman Multi Strategy or give up 6.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Pinnacle Sherman Multi Strateg  vs.  Malaga Financial

Pinnacle Sherman Multi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pinnacle Sherman Multi Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Pinnacle Sherman is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Malaga Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Malaga Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Pinnacle Sherman and Malaga Financial

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

The idea behind Pinnacle Sherman Multi Strategy and Malaga Financial 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.