Correlation Between Magna International and Workhorse

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

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

Diversification Opportunities for Magna International and Workhorse

0.78

Correlation Coefficient

Magna International  Workhorse

Poor diversification

The 3 months correlation between Magna and Workhorse is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Workhorse Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workhorse Group 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 Workhorse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workhorse Group has no effect on the direction of Magna International i.e., Magna International and Workhorse go up and down completely randomly.

Pair Corralation between Magna International and Workhorse

Considering the 90-day investment horizon Magna International is expected to generate 0.22 times more return on investment than Workhorse. However, Magna International is 4.58 times less risky than Workhorse. It trades about 0.12 of its potential returns per unit of risk. Workhorse Group is currently generating about -0.03 per unit of risk. If you would invest  4,386  in Magna International on September 12, 2024 and sell it today you would earn a total of  185.00  from holding Magna International or generate 4.22% 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.  Workhorse Group

Magna International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Magna International sustained solid returns over the last few months and may actually be approaching a breakup point.

Workhorse Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Workhorse Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical indicators, Workhorse unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magna International and Workhorse

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

The idea behind Magna International and Workhorse Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.