Correlation Between NFI and Magna International

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

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

Diversification Opportunities for NFI and Magna International

-0.81

Correlation Coefficient

NFI  Magna International

Pay attention - limited upside

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

Pair Corralation between NFI and Magna International

Assuming the 90 days trading horizon NFI Group is expected to under-perform the Magna International. But the stock apears to be less risky and, when comparing its historical volatility, NFI Group is 1.31 times less risky than Magna International. The stock trades about -0.27 of its potential returns per unit of risk. The Magna International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,620  in Magna International on August 30, 2024 and sell it today you would earn a total of  684.00  from holding Magna International or generate 12.17% return on investment over 90 days.

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

NFI Group  vs.  Magna International

NFI Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NFI Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

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. In spite of very unfluctuating basic indicators, Magna International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NFI and Magna International

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

The idea behind NFI Group and Magna International 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 Anywhere module to track or share privately all of your investments from the convenience of any device.