Correlation Between Magnite and PACIFIC

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

By analyzing existing cross correlation between Magnite and PACIFIC GAS ELECTRIC, you can compare the effects of market volatilities on Magnite and PACIFIC 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 PACIFIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnite and PACIFIC.

Diversification Opportunities for Magnite and PACIFIC

-0.03

Correlation Coefficient

Magnite  PACIFIC

Good diversification

The 3 months correlation between Magnite and PACIFIC is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Magnite and PACIFIC GAS ELECTRIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACIFIC GAS ELECTRIC 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 PACIFIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACIFIC GAS ELECTRIC has no effect on the direction of Magnite i.e., Magnite and PACIFIC go up and down completely randomly.

Pair Corralation between Magnite and PACIFIC

Given the investment horizon of 90 days Magnite is expected to generate 13.69 times less return on investment than PACIFIC. But when comparing it to its historical volatility, Magnite is 11.14 times less risky than PACIFIC. It trades about 0.03 of its potential returns per unit of risk. PACIFIC GAS ELECTRIC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,232  in PACIFIC GAS ELECTRIC on October 22, 2024 and sell it today you would lose (253.00) from holding PACIFIC GAS ELECTRIC or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.78%
Values	Daily Returns

Magnite  vs.  PACIFIC GAS ELECTRIC

Magnite

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 10 (%) 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.

PACIFIC GAS ELECTRIC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PACIFIC GAS ELECTRIC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PACIFIC GAS ELECTRIC investors.

Pair Trading with Magnite and PACIFIC

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

The idea behind Magnite and PACIFIC GAS ELECTRIC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.