Correlation Between Kobay Tech and Magni Tech

Can any of the company-specific risk be diversified away by investing in both Kobay 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 Kobay 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 Kobay Tech Bhd and Magni Tech Industries, you can compare the effects of market volatilities on Kobay 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 Kobay Tech with a short position of Magni Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kobay Tech and Magni Tech.

Diversification Opportunities for Kobay Tech and Magni Tech

0.44

Correlation Coefficient

Kobay Tech  Magni Tech

Very weak diversification

The 3 months correlation between Kobay and Magni is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Kobay Tech Bhd 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 Kobay 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 Kobay Tech Bhd 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 Kobay Tech i.e., Kobay Tech and Magni Tech go up and down completely randomly.

Pair Corralation between Kobay Tech and Magni Tech

Assuming the 90 days trading horizon Kobay Tech is expected to generate 1.8 times less return on investment than Magni Tech. In addition to that, Kobay Tech is 2.99 times more volatile than Magni Tech Industries. It trades about 0.03 of its total potential returns per unit of risk. Magni Tech Industries is currently generating about 0.17 per unit of volatility. If you would invest  255.00  in Magni Tech Industries on September 16, 2024 and sell it today you would earn a total of  31.00  from holding Magni Tech Industries or generate 12.16% return on investment over 90 days.

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

Kobay Tech Bhd  vs.  Magni Tech Industries

Kobay Tech Bhd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kobay Tech Bhd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kobay Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Kobay Tech and Magni Tech

The main advantage of trading using opposite Kobay Tech and Magni Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kobay 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 Kobay Tech Bhd 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.