Correlation Between SFP Tech and Magni Tech

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

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

Diversification Opportunities for SFP Tech and Magni Tech

0.72

Correlation Coefficient

SFP Tech  Magni Tech

Poor diversification

The 3 months correlation between SFP and Magni is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SFP Tech Holdings and Magni Tech Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magni Tech Industries and SFP 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 SFP Tech Holdings are associated (or correlated) with Magni Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magni Tech Industries has no effect on the direction of SFP Tech i.e., SFP Tech and Magni Tech go up and down completely randomly.

Pair Corralation between SFP Tech and Magni Tech

Assuming the 90 days trading horizon SFP Tech is expected to generate 1.72 times less return on investment than Magni Tech. In addition to that, SFP Tech is 1.51 times more volatile than Magni Tech Industries. It trades about 0.19 of its total potential returns per unit of risk. Magni Tech Industries is currently generating about 0.49 per unit of volatility. If you would invest  251.00  in Magni Tech Industries on September 16, 2024 and sell it today you would earn a total of  35.00  from holding Magni Tech Industries or generate 13.94% return on investment over 90 days.

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

SFP Tech Holdings  vs.  Magni Tech Industries

SFP Tech Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SFP Tech Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SFP Tech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Magni Tech Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magni Tech Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Magni Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SFP Tech and Magni Tech

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

The idea behind SFP Tech Holdings and Magni Tech 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.