Correlation Between Magnite and Mosaic

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

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

Diversification Opportunities for Magnite and Mosaic

-0.31

Correlation Coefficient

Magnite  Mosaic

Very good diversification

The 3 months correlation between Magnite and Mosaic is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Magnite and The Mosaic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mosaic and Magnite 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 Magnite are associated (or correlated) with Mosaic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mosaic has no effect on the direction of Magnite i.e., Magnite and Mosaic go up and down completely randomly.

Pair Corralation between Magnite and Mosaic

Given the investment horizon of 90 days Magnite is expected to generate 1.43 times more return on investment than Mosaic. However, Magnite is 1.43 times more volatile than The Mosaic. It trades about 0.15 of its potential returns per unit of risk. The Mosaic is currently generating about 0.04 per unit of risk. If you would invest  1,280  in Magnite on October 26, 2024 and sell it today you would earn a total of  425.50  from holding Magnite or generate 33.24% return on investment over 90 days.

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

Magnite  vs.  The Mosaic

Magnite

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Magnite demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Mosaic

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Mosaic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Mosaic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Magnite and Mosaic

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

The idea behind Magnite and The Mosaic 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.