Correlation Between Information Services and Magnum Goldcorp

Can any of the company-specific risk be diversified away by investing in both Information Services and Magnum Goldcorp 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 Information Services and Magnum Goldcorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Information Services and Magnum Goldcorp, you can compare the effects of market volatilities on Information Services and Magnum Goldcorp 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 Information Services with a short position of Magnum Goldcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Services and Magnum Goldcorp.

Diversification Opportunities for Information Services and Magnum Goldcorp

0.42

Correlation Coefficient

Information Services  Magnum Goldcorp

Very weak diversification

The 3 months correlation between Information and Magnum is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Information Services and Magnum Goldcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnum Goldcorp and Information Services 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 Information Services are associated (or correlated) with Magnum Goldcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnum Goldcorp has no effect on the direction of Information Services i.e., Information Services and Magnum Goldcorp go up and down completely randomly.

Pair Corralation between Information Services and Magnum Goldcorp

Assuming the 90 days trading horizon Information Services is expected to generate 0.17 times more return on investment than Magnum Goldcorp. However, Information Services is 5.9 times less risky than Magnum Goldcorp. It trades about 0.19 of its potential returns per unit of risk. Magnum Goldcorp is currently generating about -0.32 per unit of risk. If you would invest  2,597  in Information Services on October 22, 2024 and sell it today you would earn a total of  111.00  from holding Information Services or generate 4.27% return on investment over 90 days.

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

Information Services  vs.  Magnum Goldcorp

Information Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Information Services is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Magnum Goldcorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magnum Goldcorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Information Services and Magnum Goldcorp

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

The idea behind Information Services and Magnum Goldcorp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.