Correlation Between Magnum Opus and Iconic Sports
Can any of the company-specific risk be diversified away by investing in both Magnum Opus and Iconic Sports 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 Magnum Opus and Iconic Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magnum Opus Acquisition and Iconic Sports Acquisition, you can compare the effects of market volatilities on Magnum Opus and Iconic Sports 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 Magnum Opus with a short position of Iconic Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnum Opus and Iconic Sports.
Diversification Opportunities for Magnum Opus and Iconic Sports
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Magnum and Iconic is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Magnum Opus Acquisition and Iconic Sports Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iconic Sports Acquisition and Magnum Opus 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 Magnum Opus Acquisition are associated (or correlated) with Iconic Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iconic Sports Acquisition has no effect on the direction of Magnum Opus i.e., Magnum Opus and Iconic Sports go up and down completely randomly.
Pair Corralation between Magnum Opus and Iconic Sports
Considering the 90-day investment horizon Magnum Opus Acquisition is expected to generate 3.65 times more return on investment than Iconic Sports. However, Magnum Opus is 3.65 times more volatile than Iconic Sports Acquisition. It trades about 0.09 of its potential returns per unit of risk. Iconic Sports Acquisition is currently generating about 0.31 per unit of risk. If you would invest 1,002 in Magnum Opus Acquisition on August 26, 2024 and sell it today you would earn a total of 47.00 from holding Magnum Opus Acquisition or generate 4.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.37% |
| Values | Daily Returns |
Magnum Opus Acquisition vs. Iconic Sports Acquisition
Performance |
| Timeline |
| Magnum Opus Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Iconic Sports Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Magnum Opus and Iconic Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magnum Opus and Iconic Sports
The main advantage of trading using opposite Magnum Opus and Iconic Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnum Opus position performs unexpectedly, Iconic Sports 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 Iconic Sports will offset losses from the drop in Iconic Sports' long position.The idea behind Magnum Opus Acquisition and Iconic Sports Acquisition 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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