Correlation Between Mach7 Technologies and West African
Can any of the company-specific risk be diversified away by investing in both Mach7 Technologies and West African 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 Mach7 Technologies and West African into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mach7 Technologies and West African Resources, you can compare the effects of market volatilities on Mach7 Technologies and West African 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 Mach7 Technologies with a short position of West African. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mach7 Technologies and West African.
Diversification Opportunities for Mach7 Technologies and West African
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mach7 and West is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Mach7 Technologies and West African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West African Resources and Mach7 Technologies 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 Mach7 Technologies are associated (or correlated) with West African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West African Resources has no effect on the direction of Mach7 Technologies i.e., Mach7 Technologies and West African go up and down completely randomly.
Pair Corralation between Mach7 Technologies and West African
Assuming the 90 days trading horizon Mach7 Technologies is expected to under-perform the West African. But the stock apears to be less risky and, when comparing its historical volatility, Mach7 Technologies is 1.04 times less risky than West African. The stock trades about -0.06 of its potential returns per unit of risk. The West African Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 142.00 in West African Resources on November 3, 2024 and sell it today you would earn a total of 25.00 from holding West African Resources or generate 17.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mach7 Technologies vs. West African Resources
Performance |
| Timeline |
| Mach7 Technologies |
| West African Resources |
Mach7 Technologies and West African Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mach7 Technologies and West African
The main advantage of trading using opposite Mach7 Technologies and West African positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mach7 Technologies position performs unexpectedly, West African 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 West African will offset losses from the drop in West African's long position.| Mach7 Technologies vs. Aneka Tambang Tbk | Mach7 Technologies vs. BHP Group Limited | Mach7 Technologies vs. Rio Tinto | Mach7 Technologies vs. Macquarie Group Ltd |
| West African vs. Northern Star Resources | West African vs. Evolution Mining | West African vs. Bluescope Steel | West African vs. Sandfire Resources NL |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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