Correlation Between Locafy and Metalpha Technology

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

By analyzing existing cross correlation between Locafy Limited and Metalpha Technology Holding, you can compare the effects of market volatilities on Locafy and Metalpha Technology 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 Locafy with a short position of Metalpha Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Locafy and Metalpha Technology.

Diversification Opportunities for Locafy and Metalpha Technology

0.45

Correlation Coefficient

Locafy  Metalpha Technology

Very weak diversification

The 3 months correlation between Locafy and Metalpha is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Locafy Limited and Metalpha Technology Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalpha Technology and Locafy 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 Locafy Limited are associated (or correlated) with Metalpha Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalpha Technology has no effect on the direction of Locafy i.e., Locafy and Metalpha Technology go up and down completely randomly.

Pair Corralation between Locafy and Metalpha Technology

Assuming the 90 days horizon Locafy Limited is expected to generate 3.59 times more return on investment than Metalpha Technology. However, Locafy is 3.59 times more volatile than Metalpha Technology Holding. It trades about 0.08 of its potential returns per unit of risk. Metalpha Technology Holding is currently generating about 0.13 per unit of risk. If you would invest  1,670  in Locafy Limited on December 29, 2024 and sell it today you would lose (1,180) from holding Locafy Limited or give up 70.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.89%
Values	Daily Returns

Locafy Limited  vs.  Metalpha Technology Holding

Locafy Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Locafy Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Locafy showed solid returns over the last few months and may actually be approaching a breakup point.

Metalpha Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metalpha Technology Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Metalpha Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Locafy and Metalpha Technology

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

The idea behind Locafy Limited and Metalpha Technology Holding 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.