Correlation Between Brite Tech and MClean Technologies

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

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

Diversification Opportunities for Brite Tech and MClean Technologies

0.06

Correlation Coefficient

Brite Tech  MClean Technologies

Significant diversification

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

Pair Corralation between Brite Tech and MClean Technologies

Assuming the 90 days trading horizon Brite Tech Bhd is expected to under-perform the MClean Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Brite Tech Bhd is 2.97 times less risky than MClean Technologies. The stock trades about -0.06 of its potential returns per unit of risk. The MClean Technologies Bhd is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  30.00  in MClean Technologies Bhd on September 23, 2024 and sell it today you would lose (1.00) from holding MClean Technologies Bhd or give up 3.33% of portfolio value over 90 days.

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

Brite Tech Bhd  vs.  MClean Technologies Bhd

Brite Tech Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brite Tech Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Brite Tech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

MClean Technologies Bhd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MClean Technologies Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, MClean Technologies is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Brite Tech and MClean Technologies

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

The idea behind Brite Tech Bhd and MClean Technologies Bhd 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.