Correlation Between Mentor Capital and Magic Empire

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

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

Diversification Opportunities for Mentor Capital and Magic Empire

0.48

Correlation Coefficient

Mentor Capital  Magic Empire

Very weak diversification

The 3 months correlation between Mentor and Magic is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mentor Capital and Magic Empire Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magic Empire Global and Mentor Capital 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 Mentor Capital are associated (or correlated) with Magic Empire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magic Empire Global has no effect on the direction of Mentor Capital i.e., Mentor Capital and Magic Empire go up and down completely randomly.

Pair Corralation between Mentor Capital and Magic Empire

Given the investment horizon of 90 days Mentor Capital is expected to generate 0.85 times more return on investment than Magic Empire. However, Mentor Capital is 1.17 times less risky than Magic Empire. It trades about 0.0 of its potential returns per unit of risk. Magic Empire Global is currently generating about -0.01 per unit of risk. If you would invest  6.00  in Mentor Capital on December 2, 2024 and sell it today you would lose (1.00) from holding Mentor Capital or give up 16.67% of portfolio value over 90 days.

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

Mentor Capital  vs.  Magic Empire Global

Mentor Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mentor Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Mentor Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Magic Empire Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magic Empire Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Mentor Capital and Magic Empire

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

The idea behind Mentor Capital and Magic Empire Global 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.