Correlation Between Magellan Financial and Aeris Environmental

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

By analyzing existing cross correlation between Magellan Financial Group and Aeris Environmental, you can compare the effects of market volatilities on Magellan Financial and Aeris Environmental 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 Magellan Financial with a short position of Aeris Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Aeris Environmental.

Diversification Opportunities for Magellan Financial and Aeris Environmental

-0.26

Correlation Coefficient

Magellan Financial  Aeris Environmental

Very good diversification

The 3 months correlation between Magellan and Aeris is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Aeris Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeris Environmental and Magellan Financial 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 Magellan Financial Group are associated (or correlated) with Aeris Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeris Environmental has no effect on the direction of Magellan Financial i.e., Magellan Financial and Aeris Environmental go up and down completely randomly.

Pair Corralation between Magellan Financial and Aeris Environmental

Assuming the 90 days trading horizon Magellan Financial Group is expected to generate 0.6 times more return on investment than Aeris Environmental. However, Magellan Financial Group is 1.67 times less risky than Aeris Environmental. It trades about 0.12 of its potential returns per unit of risk. Aeris Environmental is currently generating about 0.06 per unit of risk. If you would invest  820.00  in Magellan Financial Group on September 29, 2024 and sell it today you would earn a total of  303.00  from holding Magellan Financial Group or generate 36.95% return on investment over 90 days.

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

Magellan Financial Group  vs.  Aeris Environmental

Magellan Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magellan Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Magellan Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aeris Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeris Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Magellan Financial and Aeris Environmental

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

The idea behind Magellan Financial Group and Aeris Environmental 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.