Correlation Between Metalpha Technology and BRANDES EMERGING

Can any of the company-specific risk be diversified away by investing in both Metalpha Technology and BRANDES EMERGING 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 Metalpha Technology and BRANDES EMERGING into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Metalpha Technology Holding and BRANDES EMERGING MARKETS, you can compare the effects of market volatilities on Metalpha Technology and BRANDES EMERGING 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 Metalpha Technology with a short position of BRANDES EMERGING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metalpha Technology and BRANDES EMERGING.

Diversification Opportunities for Metalpha Technology and BRANDES EMERGING

Modest diversification

The 3 months correlation between Metalpha and BRANDES is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Metalpha Technology Holding and BRANDES EMERGING MARKETS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRANDES EMERGING MARKETS and Metalpha Technology 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 Metalpha Technology Holding are associated (or correlated) with BRANDES EMERGING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRANDES EMERGING MARKETS has no effect on the direction of Metalpha Technology i.e., Metalpha Technology and BRANDES EMERGING go up and down completely randomly.

Pair Corralation between Metalpha Technology and BRANDES EMERGING

Given the investment horizon of 90 days Metalpha Technology Holding is expected to generate 5.26 times more return on investment than BRANDES EMERGING. However, Metalpha Technology is 5.26 times more volatile than BRANDES EMERGING MARKETS. It trades about 0.03 of its potential returns per unit of risk. BRANDES EMERGING MARKETS is currently generating about -0.01 per unit of risk. If you would invest  154.00  in Metalpha Technology Holding on July 2, 2023 and sell it today you would lose (18.00) from holding Metalpha Technology Holding or give up 11.69% of portfolio value over 90 days.

Metalpha Technology Holding  vs.  BRANDES EMERGING MARKETS

Metalpha Technology

Metalpha Performance

4 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Metalpha Technology Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Metalpha Technology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

BRANDES EMERGING MARKETS

BRANDES Performance

0 of 100

Over the last 90 days BRANDES EMERGING MARKETS has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, BRANDES EMERGING is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metalpha Technology and BRANDES EMERGING

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

The idea behind Metalpha Technology Holding and BRANDES EMERGING MARKETS 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.