Correlation Between Magna International and GE Vernova

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

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

Diversification Opportunities for Magna International and GE Vernova

0.81

Correlation Coefficient

Magna International  GE Vernova

Very poor diversification

The 3 months correlation between Magna and GEV is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and GE Vernova LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Vernova LLC 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 GE Vernova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Vernova LLC has no effect on the direction of Magna International i.e., Magna International and GE Vernova go up and down completely randomly.

Pair Corralation between Magna International and GE Vernova

Considering the 90-day investment horizon Magna International is expected to generate 3.67 times less return on investment than GE Vernova. But when comparing it to its historical volatility, Magna International is 1.23 times less risky than GE Vernova. It trades about 0.07 of its potential returns per unit of risk. GE Vernova LLC is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  23,715  in GE Vernova LLC on September 17, 2024 and sell it today you would earn a total of  9,486  from holding GE Vernova LLC or generate 40.0% return on investment over 90 days.

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

Magna International  vs.  GE Vernova LLC

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.

GE Vernova LLC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magna International and GE Vernova

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

The idea behind Magna International and GE Vernova LLC 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.