Correlation Between MAG Interactive and Gapwaves

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

By analyzing existing cross correlation between MAG Interactive AB and Gapwaves AB Series, you can compare the effects of market volatilities on MAG Interactive and Gapwaves 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 MAG Interactive with a short position of Gapwaves. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAG Interactive and Gapwaves.

Diversification Opportunities for MAG Interactive and Gapwaves

-0.76

Correlation Coefficient

MAG Interactive  Gapwaves

Pay attention - limited upside

The 3 months correlation between MAG and Gapwaves is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding MAG Interactive AB and Gapwaves AB Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gapwaves AB Series and MAG Interactive 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 MAG Interactive AB are associated (or correlated) with Gapwaves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gapwaves AB Series has no effect on the direction of MAG Interactive i.e., MAG Interactive and Gapwaves go up and down completely randomly.

Pair Corralation between MAG Interactive and Gapwaves

Assuming the 90 days trading horizon MAG Interactive AB is expected to under-perform the Gapwaves. But the stock apears to be less risky and, when comparing its historical volatility, MAG Interactive AB is 1.02 times less risky than Gapwaves. The stock trades about -0.06 of its potential returns per unit of risk. The Gapwaves AB Series is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,895  in Gapwaves AB Series on September 26, 2024 and sell it today you would lose (1,367) from holding Gapwaves AB Series or give up 47.22% of portfolio value over 90 days.

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

MAG Interactive AB  vs.  Gapwaves AB Series

MAG Interactive AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MAG Interactive AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MAG Interactive unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gapwaves AB Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gapwaves AB Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with MAG Interactive and Gapwaves

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

The idea behind MAG Interactive AB and Gapwaves AB Series 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 Commodity Directory module to find actively traded commodities issued by global exchanges.