Correlation Between Magellan Financial and Apiam Animal

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

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

Diversification Opportunities for Magellan Financial and Apiam Animal

0.08

Correlation Coefficient

Magellan Financial  Apiam Animal

Significant diversification

The 3 months correlation between Magellan and Apiam is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Apiam Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apiam Animal Health and Magellan 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 Magellan Financial Group are associated (or correlated) with Apiam Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apiam Animal Health has no effect on the direction of Magellan Financial i.e., Magellan Financial and Apiam Animal go up and down completely randomly.

Pair Corralation between Magellan Financial and Apiam Animal

Assuming the 90 days trading horizon Magellan Financial Group is expected to generate 0.56 times more return on investment than Apiam Animal. However, Magellan Financial Group is 1.77 times less risky than Apiam Animal. It trades about 0.03 of its potential returns per unit of risk. Apiam Animal Health is currently generating about -0.38 per unit of risk. If you would invest  1,062  in Magellan Financial Group on September 4, 2024 and sell it today you would earn a total of  9.00  from holding Magellan Financial Group or generate 0.85% return on investment over 90 days.

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

Magellan Financial Group  vs.  Apiam Animal Health

Magellan Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magellan Financial Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Magellan Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Apiam Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apiam Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Apiam Animal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Magellan Financial and Apiam Animal

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

The idea behind Magellan Financial Group and Apiam Animal Health 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.