Correlation Between Knorr Bremse and Magna International

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

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

Diversification Opportunities for Knorr Bremse and Magna International

-0.48

Correlation Coefficient

Knorr Bremse  Magna International

Very good diversification

The 3 months correlation between Knorr and Magna is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Knorr Bremse Aktiengesellschaf and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Knorr Bremse 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 Knorr Bremse Aktiengesellschaft 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 Knorr Bremse i.e., Knorr Bremse and Magna International go up and down completely randomly.

Pair Corralation between Knorr Bremse and Magna International

Assuming the 90 days horizon Knorr Bremse Aktiengesellschaft is expected to under-perform the Magna International. But the pink sheet apears to be less risky and, when comparing its historical volatility, Knorr Bremse Aktiengesellschaft is 1.23 times less risky than Magna International. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Magna International is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,083  in Magna International on October 10, 2024 and sell it today you would lose (50.00) from holding Magna International or give up 1.22% of portfolio value over 90 days.

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

Knorr Bremse Aktiengesellschaf  vs.  Magna International

Knorr Bremse Aktieng

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Knorr Bremse Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Magna International

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Magna International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Magna International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Knorr Bremse and Magna International

The main advantage of trading using opposite Knorr Bremse and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knorr Bremse 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 Knorr Bremse Aktiengesellschaft 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.