Correlation Between Magic Empire and AMTD Digital

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

By analyzing existing cross correlation between Magic Empire Global and AMTD Digital, you can compare the effects of market volatilities on Magic Empire and AMTD Digital 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 Magic Empire with a short position of AMTD Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Empire and AMTD Digital.

Diversification Opportunities for Magic Empire and AMTD Digital

0.7

Correlation Coefficient

Magic Empire  AMTD Digital

Poor diversification

The 3 months correlation between Magic and AMTD is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Magic Empire Global and AMTD Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMTD Digital and Magic Empire 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 Magic Empire Global are associated (or correlated) with AMTD Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMTD Digital has no effect on the direction of Magic Empire i.e., Magic Empire and AMTD Digital go up and down completely randomly.

Pair Corralation between Magic Empire and AMTD Digital

Given the investment horizon of 90 days Magic Empire Global is expected to generate 0.81 times more return on investment than AMTD Digital. However, Magic Empire Global is 1.24 times less risky than AMTD Digital. It trades about 0.08 of its potential returns per unit of risk. AMTD Digital is currently generating about 0.05 per unit of risk. If you would invest  44.00  in Magic Empire Global on September 3, 2024 and sell it today you would earn a total of  9.00  from holding Magic Empire Global or generate 20.45% return on investment over 90 days.

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

Magic Empire Global  vs.  AMTD Digital

Magic Empire Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magic Empire Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Magic Empire disclosed solid returns over the last few months and may actually be approaching a breakup point.

AMTD Digital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMTD Digital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking signals, AMTD Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magic Empire and AMTD Digital

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

The idea behind Magic Empire Global and AMTD Digital 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.