Correlation Between Magna Mining and Solution Financial

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

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

Diversification Opportunities for Magna Mining and Solution Financial

-0.58

Correlation Coefficient

Magna Mining  Solution Financial

Excellent diversification

The 3 months correlation between Magna and Solution is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Magna Mining and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial and Magna Mining 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 Magna Mining are associated (or correlated) with Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Magna Mining i.e., Magna Mining and Solution Financial go up and down completely randomly.

Pair Corralation between Magna Mining and Solution Financial

Assuming the 90 days trading horizon Magna Mining is expected to generate 10.48 times less return on investment than Solution Financial. In addition to that, Magna Mining is 1.86 times more volatile than Solution Financial. It trades about 0.01 of its total potential returns per unit of risk. Solution Financial is currently generating about 0.1 per unit of volatility. If you would invest  28.00  in Solution Financial on September 22, 2024 and sell it today you would earn a total of  1.00  from holding Solution Financial or generate 3.57% return on investment over 90 days.

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

Magna Mining  vs.  Solution Financial

Magna Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Magna Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Solution Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Solution Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Magna Mining and Solution Financial

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

The idea behind Magna Mining and Solution 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.