Correlation Between Global E and Magnite

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

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

Diversification Opportunities for Global E and Magnite

0.87

Correlation Coefficient

Global E  Magnite

Very poor diversification

The 3 months correlation between Global and Magnite is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Magnite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnite and Global E 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 Global E Online are associated (or correlated) with Magnite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnite has no effect on the direction of Global E i.e., Global E and Magnite go up and down completely randomly.

Pair Corralation between Global E and Magnite

Given the investment horizon of 90 days Global E Online is expected to under-perform the Magnite. But the stock apears to be less risky and, when comparing its historical volatility, Global E Online is 1.52 times less risky than Magnite. The stock trades about -0.15 of its potential returns per unit of risk. The Magnite is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,690  in Magnite on October 12, 2024 and sell it today you would lose (44.00) from holding Magnite or give up 2.6% of portfolio value over 90 days.

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

Global E Online  vs.  Magnite

Global E Online

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Magnite

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Magnite demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global E and Magnite

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

The idea behind Global E Online and Magnite 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.