Correlation Between SHUAA Partners and Magnum Opus
Can any of the company-specific risk be diversified away by investing in both SHUAA Partners and Magnum Opus 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 SHUAA Partners and Magnum Opus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SHUAA Partners Acquisition and Magnum Opus Acquisition, you can compare the effects of market volatilities on SHUAA Partners and Magnum Opus 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 SHUAA Partners with a short position of Magnum Opus. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHUAA Partners and Magnum Opus.
Diversification Opportunities for SHUAA Partners and Magnum Opus
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SHUAA and Magnum is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SHUAA Partners Acquisition and Magnum Opus Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnum Opus Acquisition and SHUAA Partners 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 SHUAA Partners Acquisition are associated (or correlated) with Magnum Opus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnum Opus Acquisition has no effect on the direction of SHUAA Partners i.e., SHUAA Partners and Magnum Opus go up and down completely randomly.
Pair Corralation between SHUAA Partners and Magnum Opus
Given the investment horizon of 90 days SHUAA Partners Acquisition is expected to generate 0.57 times more return on investment than Magnum Opus. However, SHUAA Partners Acquisition is 1.76 times less risky than Magnum Opus. It trades about 0.17 of its potential returns per unit of risk. Magnum Opus Acquisition is currently generating about 0.09 per unit of risk. If you would invest 1,025 in SHUAA Partners Acquisition on August 30, 2024 and sell it today you would earn a total of 52.00 from holding SHUAA Partners Acquisition or generate 5.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.35% |
| Values | Daily Returns |
SHUAA Partners Acquisition vs. Magnum Opus Acquisition
Performance |
| Timeline |
| SHUAA Partners Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Magnum Opus Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
SHUAA Partners and Magnum Opus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SHUAA Partners and Magnum Opus
The main advantage of trading using opposite SHUAA Partners and Magnum Opus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHUAA Partners position performs unexpectedly, Magnum Opus 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 Magnum Opus will offset losses from the drop in Magnum Opus' long position.The idea behind SHUAA Partners Acquisition and Magnum Opus 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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