Correlation Between Magna Mining and Canaf Investments

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

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

Diversification Opportunities for Magna Mining and Canaf Investments

-0.06

Correlation Coefficient

Magna Mining  Canaf Investments

Good diversification

The 3 months correlation between Magna and Canaf is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Magna Mining and Canaf Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaf Investments and Magna Mining 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 Magna Mining are associated (or correlated) with Canaf Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaf Investments has no effect on the direction of Magna Mining i.e., Magna Mining and Canaf Investments go up and down completely randomly.

Pair Corralation between Magna Mining and Canaf Investments

Assuming the 90 days trading horizon Magna Mining is expected to under-perform the Canaf Investments. In addition to that, Magna Mining is 1.04 times more volatile than Canaf Investments. It trades about -0.03 of its total potential returns per unit of risk. Canaf Investments is currently generating about 0.08 per unit of volatility. If you would invest  30.00  in Canaf Investments on October 8, 2024 and sell it today you would earn a total of  1.00  from holding Canaf Investments or generate 3.33% return on investment over 90 days.

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

Magna Mining  vs.  Canaf Investments

Magna Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Magna Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Canaf Investments

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Canaf Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Canaf Investments is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Magna Mining and Canaf Investments

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

The idea behind Magna Mining and Canaf Investments 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.