Correlation Between MA Financial and Insignia Financial

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

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

Diversification Opportunities for MA Financial and Insignia Financial

0.55

Correlation Coefficient

MA Financial  Insignia Financial

Very weak diversification

The 3 months correlation between MAF and Insignia is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding MA Financial Group and Insignia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insignia Financial and MA Financial 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 MA Financial Group are associated (or correlated) with Insignia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insignia Financial has no effect on the direction of MA Financial i.e., MA Financial and Insignia Financial go up and down completely randomly.

Pair Corralation between MA Financial and Insignia Financial

Assuming the 90 days trading horizon MA Financial is expected to generate 1.38 times less return on investment than Insignia Financial. But when comparing it to its historical volatility, MA Financial Group is 1.12 times less risky than Insignia Financial. It trades about 0.05 of its potential returns per unit of risk. Insignia Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  234.00  in Insignia Financial on September 26, 2024 and sell it today you would earn a total of  123.00  from holding Insignia Financial or generate 52.56% return on investment over 90 days.

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

MA Financial Group  vs.  Insignia Financial

MA Financial Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MA Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MA Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Insignia Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Insignia Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Insignia Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MA Financial and Insignia Financial

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

The idea behind MA Financial Group and Insignia Financial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.