Correlation Between Magellan Financial and Gratifii

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

Diversification Opportunities for Magellan Financial and Gratifii

0.43

Correlation Coefficient

Magellan Financial  Gratifii

Very weak diversification

The 3 months correlation between Magellan and Gratifii is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Gratifii in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gratifii 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 Gratifii. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gratifii has no effect on the direction of Magellan Financial i.e., Magellan Financial and Gratifii go up and down completely randomly.

Pair Corralation between Magellan Financial and Gratifii

Assuming the 90 days trading horizon Magellan Financial is expected to generate 4.58 times less return on investment than Gratifii. But when comparing it to its historical volatility, Magellan Financial Group is 6.65 times less risky than Gratifii. It trades about 0.18 of its potential returns per unit of risk. Gratifii is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6.84  in Gratifii on September 5, 2024 and sell it today you would earn a total of  4.16  from holding Gratifii or generate 60.82% 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.  Gratifii

Magellan Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magellan Financial Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Magellan Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gratifii

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gratifii are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Gratifii unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magellan Financial and Gratifii

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

The idea behind Magellan Financial Group and Gratifii 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.