Correlation Between Metalpha Technology and Locafy

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

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

Diversification Opportunities for Metalpha Technology and Locafy

-0.07

Correlation Coefficient

Metalpha Technology  Locafy

Good diversification

The 3 months correlation between Metalpha and Locafy is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Metalpha Technology Holding and Locafy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locafy and Metalpha Technology 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 Metalpha Technology Holding are associated (or correlated) with Locafy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locafy has no effect on the direction of Metalpha Technology i.e., Metalpha Technology and Locafy go up and down completely randomly.

Pair Corralation between Metalpha Technology and Locafy

Given the investment horizon of 90 days Metalpha Technology Holding is expected to generate 1.32 times more return on investment than Locafy. However, Metalpha Technology is 1.32 times more volatile than Locafy. It trades about 0.13 of its potential returns per unit of risk. Locafy is currently generating about -0.06 per unit of risk. If you would invest  111.00  in Metalpha Technology Holding on December 29, 2024 and sell it today you would earn a total of  62.00  from holding Metalpha Technology Holding or generate 55.86% return on investment over 90 days.

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

Metalpha Technology Holding  vs.  Locafy

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.

Locafy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Locafy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Metalpha Technology and Locafy

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

The idea behind Metalpha Technology Holding and Locafy 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.