Correlation Between ECARX Holdings and Magna International

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

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

Diversification Opportunities for ECARX Holdings and Magna International

0.19

Correlation Coefficient

ECARX Holdings  Magna International

Average diversification

The 3 months correlation between ECARX and Magna is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding ECARX Holdings Class and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and ECARX Holdings 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 ECARX Holdings Class 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 ECARX Holdings i.e., ECARX Holdings and Magna International go up and down completely randomly.

Pair Corralation between ECARX Holdings and Magna International

Considering the 90-day investment horizon ECARX Holdings Class is expected to generate 2.74 times more return on investment than Magna International. However, ECARX Holdings is 2.74 times more volatile than Magna International. It trades about 0.02 of its potential returns per unit of risk. Magna International is currently generating about -0.04 per unit of risk. If you would invest  210.00  in ECARX Holdings Class on September 14, 2024 and sell it today you would lose (12.00) from holding ECARX Holdings Class or give up 5.71% of portfolio value over 90 days.

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

ECARX Holdings Class  vs.  Magna International

ECARX Holdings Class

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Class are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, ECARX Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

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 unfluctuating technical and fundamental indicators, Magna International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ECARX Holdings and Magna International

The main advantage of trading using opposite ECARX Holdings and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECARX Holdings 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 ECARX Holdings Class 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.