Correlation Between Magna International and Marine Products

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

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

Diversification Opportunities for Magna International and Marine Products

0.72

Correlation Coefficient

Magna International  Marine Products

Poor diversification

The 3 months correlation between Magna and Marine is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products 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 Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Magna International i.e., Magna International and Marine Products go up and down completely randomly.

Pair Corralation between Magna International and Marine Products

Considering the 90-day investment horizon Magna International is expected to generate 1.37 times more return on investment than Marine Products. However, Magna International is 1.37 times more volatile than Marine Products. It trades about 0.09 of its potential returns per unit of risk. Marine Products is currently generating about 0.04 per unit of risk. If you would invest  3,971  in Magna International on September 16, 2024 and sell it today you would earn a total of  459.00  from holding Magna International or generate 11.56% 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.  Marine Products

Magna International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 7 (%) 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.

Marine Products

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marine Products are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Magna International and Marine Products

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

The idea behind Magna International and Marine Products 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.