Correlation Between Magna International and Dno ASA

Can any of the company-specific risk be diversified away by investing in both Magna International and Dno ASA 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 Magna International and Dno ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Magna International and Dno ASA, you can compare the effects of market volatilities on Magna International and Dno ASA 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 Magna International with a short position of Dno ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Dno ASA.

Diversification Opportunities for Magna International and Dno ASA

0.63

Correlation Coefficient

Magna International  Dno ASA

Poor diversification

The 3 months correlation between Magna and Dno is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Dno ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dno ASA and Magna International 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 Magna International are associated (or correlated) with Dno ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dno ASA has no effect on the direction of Magna International i.e., Magna International and Dno ASA go up and down completely randomly.

Pair Corralation between Magna International and Dno ASA

Assuming the 90 days horizon Magna International is expected to generate 1.3 times more return on investment than Dno ASA. However, Magna International is 1.3 times more volatile than Dno ASA. It trades about 0.09 of its potential returns per unit of risk. Dno ASA is currently generating about -0.01 per unit of risk. If you would invest  3,750  in Magna International on September 3, 2024 and sell it today you would earn a total of  470.00  from holding Magna International or generate 12.53% return on investment over 90 days.

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

Magna International  vs.  Dno ASA

Magna International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Magna International reported solid returns over the last few months and may actually be approaching a breakup point.

Dno ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dno ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dno ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Magna International and Dno ASA

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

The idea behind Magna International and Dno ASA 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 CEOs Directory module to screen CEOs from public companies around the world.