Correlation Between Magna International and Antero Midstream

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

By analyzing existing cross correlation between Magna International and Antero Midstream Partners, you can compare the effects of market volatilities on Magna International and Antero Midstream 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 Antero Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Antero Midstream.

Diversification Opportunities for Magna International and Antero Midstream

0.53

Correlation Coefficient

Magna International  Antero Midstream

Very weak diversification

The 3 months correlation between Magna and Antero is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Antero Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Midstream Partners 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 Antero Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Midstream Partners has no effect on the direction of Magna International i.e., Magna International and Antero Midstream go up and down completely randomly.

Pair Corralation between Magna International and Antero Midstream

Considering the 90-day investment horizon Magna International is expected to generate 1.52 times more return on investment than Antero Midstream. However, Magna International is 1.52 times more volatile than Antero Midstream Partners. It trades about 0.07 of its potential returns per unit of risk. Antero Midstream Partners is currently generating about 0.03 per unit of risk. If you would invest  4,076  in Magna International on September 17, 2024 and sell it today you would earn a total of  354.00  from holding Magna International or generate 8.68% return on investment over 90 days.

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

Magna International  vs.  Antero Midstream Partners

Magna International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Magna International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Antero Midstream Partners

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Antero Midstream is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Magna International and Antero Midstream

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

The idea behind Magna International and Antero Midstream Partners 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.