Correlation Between Magellan Aerospace and Linamar

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

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

Diversification Opportunities for Magellan Aerospace and Linamar

-0.25

Correlation Coefficient

Magellan Aerospace  Linamar

Very good diversification

The 3 months correlation between Magellan and Linamar is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Aerospace and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar and Magellan Aerospace 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 Magellan Aerospace are associated (or correlated) with Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of Magellan Aerospace i.e., Magellan Aerospace and Linamar go up and down completely randomly.

Pair Corralation between Magellan Aerospace and Linamar

Assuming the 90 days trading horizon Magellan Aerospace is expected to generate 1.12 times more return on investment than Linamar. However, Magellan Aerospace is 1.12 times more volatile than Linamar. It trades about 0.12 of its potential returns per unit of risk. Linamar is currently generating about 0.02 per unit of risk. If you would invest  932.00  in Magellan Aerospace on September 15, 2024 and sell it today you would earn a total of  126.00  from holding Magellan Aerospace or generate 13.52% return on investment over 90 days.

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

Magellan Aerospace  vs.  Linamar

Magellan Aerospace

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magellan Aerospace are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal essential indicators, Magellan Aerospace displayed solid returns over the last few months and may actually be approaching a breakup point.

Linamar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Linamar are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Linamar is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Magellan Aerospace and Linamar

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

The idea behind Magellan Aerospace and Linamar 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.