Correlation Between Magellan Aerospace and Martinrea International

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

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

Diversification Opportunities for Magellan Aerospace and Martinrea International

-0.69

Correlation Coefficient

Magellan Aerospace  Martinrea International

Excellent diversification

The 3 months correlation between Magellan and Martinrea is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Aerospace and Martinrea International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martinrea International 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 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 Magellan Aerospace i.e., Magellan Aerospace and Martinrea International go up and down completely randomly.

Pair Corralation between Magellan Aerospace and Martinrea International

Assuming the 90 days trading horizon Magellan Aerospace is expected to generate 0.81 times more return on investment than Martinrea International. However, Magellan Aerospace is 1.24 times less risky than Martinrea International. It trades about 0.12 of its potential returns per unit of risk. Martinrea International is currently generating about -0.09 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	Weak
Accuracy	100.0%
Values	Daily Returns

Magellan Aerospace  vs.  Martinrea International

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.

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Magellan Aerospace and Martinrea International

The main advantage of trading using opposite Magellan Aerospace and Martinrea International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Aerospace 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 Magellan Aerospace 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.