Correlation Between Magnis Energy and Advanced Energy

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

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

Diversification Opportunities for Magnis Energy and Advanced Energy

0.3

Correlation Coefficient

Magnis Energy  Advanced Energy

Weak diversification

The 3 months correlation between Magnis and Advanced is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Magnis Energy Technologies and Advanced Energy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Indu and Magnis Energy 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 Magnis Energy Technologies are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Indu has no effect on the direction of Magnis Energy i.e., Magnis Energy and Advanced Energy go up and down completely randomly.

Pair Corralation between Magnis Energy and Advanced Energy

Assuming the 90 days horizon Magnis Energy Technologies is expected to generate 12.66 times more return on investment than Advanced Energy. However, Magnis Energy is 12.66 times more volatile than Advanced Energy Industries. It trades about 0.13 of its potential returns per unit of risk. Advanced Energy Industries is currently generating about 0.14 per unit of risk. If you would invest  2.00  in Magnis Energy Technologies on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Magnis Energy Technologies or generate 50.0% return on investment over 90 days.

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

Magnis Energy Technologies  vs.  Advanced Energy Industries

Magnis Energy Techno

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnis Energy Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Magnis Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Advanced Energy Indu

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Advanced Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnis Energy and Advanced Energy

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

The idea behind Magnis Energy Technologies and Advanced Energy Industries 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.