Correlation Between Magellan Financial and Prime Financial

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

Diversification Opportunities for Magellan Financial and Prime Financial

0.45

Correlation Coefficient

Magellan Financial  Prime Financial

Very weak diversification

The 3 months correlation between Magellan and Prime is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Prime Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Financial Group 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 Prime Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Financial Group has no effect on the direction of Magellan Financial i.e., Magellan Financial and Prime Financial go up and down completely randomly.

Pair Corralation between Magellan Financial and Prime Financial

Assuming the 90 days trading horizon Magellan Financial Group is expected to generate 0.83 times more return on investment than Prime Financial. However, Magellan Financial Group is 1.2 times less risky than Prime Financial. It trades about 0.1 of its potential returns per unit of risk. Prime Financial Group is currently generating about 0.04 per unit of risk. If you would invest  959.00  in Magellan Financial Group on September 17, 2024 and sell it today you would earn a total of  145.00  from holding Magellan Financial Group or generate 15.12% 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.  Prime Financial Group

Magellan Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magellan Financial Group are ranked lower than 8 (%) 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.

Prime Financial Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Financial Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Prime Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Magellan Financial and Prime Financial

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

The idea behind Magellan Financial Group and Prime Financial Group 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.