Correlation Between Winpak and Martinrea International

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

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

Diversification Opportunities for Winpak and Martinrea International

-0.69

Correlation Coefficient

Winpak  Martinrea International

Excellent diversification

The 3 months correlation between Winpak and Martinrea is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Winpak and Martinrea International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martinrea International and Winpak 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 Winpak are associated (or correlated) with Martinrea International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martinrea International has no effect on the direction of Winpak i.e., Winpak and Martinrea International go up and down completely randomly.

Pair Corralation between Winpak and Martinrea International

Assuming the 90 days trading horizon Winpak is expected to generate 0.6 times more return on investment than Martinrea International. However, Winpak is 1.65 times less risky than Martinrea International. It trades about 0.14 of its potential returns per unit of risk. Martinrea International is currently generating about -0.05 per unit of risk. If you would invest  4,495  in Winpak on September 5, 2024 and sell it today you would earn a total of  533.00  from holding Winpak or generate 11.86% return on investment over 90 days.

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

Winpak  vs.  Martinrea International

Winpak

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Winpak are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward-looking signals, Winpak may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Martinrea International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Martinrea International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Winpak and Martinrea International

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

The idea behind Winpak and Martinrea 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.