Correlation Between Macmahon Holdings and Alpha Lithium

Can any of the company-specific risk be diversified away by investing in both Macmahon Holdings and Alpha Lithium 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 Macmahon Holdings and Alpha Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macmahon Holdings Limited and Alpha Lithium, you can compare the effects of market volatilities on Macmahon Holdings and Alpha Lithium 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 Macmahon Holdings with a short position of Alpha Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macmahon Holdings and Alpha Lithium.

Diversification Opportunities for Macmahon Holdings and Alpha Lithium

0.27

Correlation Coefficient

Macmahon Holdings  Alpha Lithium

Modest diversification

The 3 months correlation between Macmahon and Alpha is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Macmahon Holdings Limited and Alpha Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Lithium and Macmahon Holdings 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 Macmahon Holdings Limited are associated (or correlated) with Alpha Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Lithium has no effect on the direction of Macmahon Holdings i.e., Macmahon Holdings and Alpha Lithium go up and down completely randomly.

Pair Corralation between Macmahon Holdings and Alpha Lithium

Assuming the 90 days horizon Macmahon Holdings is expected to generate 1.47 times less return on investment than Alpha Lithium. But when comparing it to its historical volatility, Macmahon Holdings Limited is 2.77 times less risky than Alpha Lithium. It trades about 0.13 of its potential returns per unit of risk. Alpha Lithium is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Alpha Lithium on March 4, 2024 and sell it today you would earn a total of  4.00  from holding Alpha Lithium or generate 16.0% return on investment over 90 days.

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

Macmahon Holdings Limited  vs.  Alpha Lithium

Macmahon Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macmahon Holdings Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Macmahon Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Alpha Lithium

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Lithium are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Alpha Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macmahon Holdings and Alpha Lithium

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

The idea behind Macmahon Holdings Limited and Alpha Lithium 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.