Correlation Between Magna International and KINDER

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

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

Diversification Opportunities for Magna International and KINDER

0.04

Correlation Coefficient

Magna International  KINDER

Significant diversification

The 3 months correlation between Magna and KINDER is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and KINDER MORGAN INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN INC 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN INC has no effect on the direction of Magna International i.e., Magna International and KINDER go up and down completely randomly.

Pair Corralation between Magna International and KINDER

Considering the 90-day investment horizon Magna International is expected to generate 7.96 times more return on investment than KINDER. However, Magna International is 7.96 times more volatile than KINDER MORGAN INC. It trades about 0.03 of its potential returns per unit of risk. KINDER MORGAN INC is currently generating about -0.16 per unit of risk. If you would invest  4,166  in Magna International on September 24, 2024 and sell it today you would earn a total of  56.00  from holding Magna International or generate 1.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Magna International  vs.  KINDER MORGAN INC

Magna International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magna International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Magna International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KINDER MORGAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER 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 KINDER

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

The idea behind Magna International and KINDER MORGAN INC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.