Correlation Between Magic Empire and Mentor Capital

Can any of the company-specific risk be diversified away by investing in both Magic Empire and Mentor Capital 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 Mentor Capital 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 Mentor Capital, you can compare the effects of market volatilities on Magic Empire and Mentor Capital 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 Mentor Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magic Empire and Mentor Capital.

Diversification Opportunities for Magic Empire and Mentor Capital

0.62

Correlation Coefficient

Magic Empire  Mentor Capital

Poor diversification

The 3 months correlation between Magic and Mentor is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Magic Empire Global and Mentor Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mentor Capital 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 Mentor Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mentor Capital has no effect on the direction of Magic Empire i.e., Magic Empire and Mentor Capital go up and down completely randomly.

Pair Corralation between Magic Empire and Mentor Capital

Given the investment horizon of 90 days Magic Empire Global is expected to under-perform the Mentor Capital. In addition to that, Magic Empire is 1.18 times more volatile than Mentor Capital. It trades about -0.04 of its total potential returns per unit of risk. Mentor Capital is currently generating about -0.01 per unit of volatility. If you would invest  6.33  in Mentor Capital on December 28, 2024 and sell it today you would lose (1.33) from holding Mentor Capital or give up 21.01% of portfolio value over 90 days.

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

Magic Empire Global  vs.  Mentor Capital

Magic Empire Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magic Empire Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Mentor Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mentor Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Mentor Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Magic Empire and Mentor Capital

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

The idea behind Magic Empire Global and Mentor Capital 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.