Correlation Between Magellan Financial and Asara Resources

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

Diversification Opportunities for Magellan Financial and Asara Resources

0.57

Correlation Coefficient

Magellan Financial  Asara Resources

Very weak diversification

The 3 months correlation between Magellan and Asara is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Asara Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asara Resources 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 Asara Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asara Resources has no effect on the direction of Magellan Financial i.e., Magellan Financial and Asara Resources go up and down completely randomly.

Pair Corralation between Magellan Financial and Asara Resources

Assuming the 90 days trading horizon Magellan Financial Group is expected to generate 0.34 times more return on investment than Asara Resources. However, Magellan Financial Group is 2.96 times less risky than Asara Resources. It trades about 0.08 of its potential returns per unit of risk. Asara Resources is currently generating about -0.01 per unit of risk. If you would invest  1,017  in Magellan Financial Group on October 7, 2024 and sell it today you would earn a total of  72.00  from holding Magellan Financial Group or generate 7.08% return on investment over 90 days.

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

Magellan Financial Group  vs.  Asara Resources

Magellan Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magellan Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Magellan Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Asara Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asara Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Asara Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Magellan Financial and Asara Resources

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

The idea behind Magellan Financial Group and Asara Resources 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.