Correlation Between Magellan Aerospace and Savaria

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

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

Diversification Opportunities for Magellan Aerospace and Savaria

0.57

Correlation Coefficient

Magellan Aerospace  Savaria

Very weak diversification

The 3 months correlation between Magellan and Savaria is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Aerospace and Savaria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Savaria 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 Savaria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Savaria has no effect on the direction of Magellan Aerospace i.e., Magellan Aerospace and Savaria go up and down completely randomly.

Pair Corralation between Magellan Aerospace and Savaria

Assuming the 90 days trading horizon Magellan Aerospace is expected to generate 1.81 times more return on investment than Savaria. However, Magellan Aerospace is 1.81 times more volatile than Savaria. It trades about -0.03 of its potential returns per unit of risk. Savaria is currently generating about -0.21 per unit of risk. If you would invest  1,055  in Magellan Aerospace on December 1, 2024 and sell it today you would lose (52.00) from holding Magellan Aerospace or give up 4.93% of portfolio value over 90 days.

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

Magellan Aerospace  vs.  Savaria

Magellan Aerospace

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magellan Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Magellan Aerospace is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Savaria

Risk-Adjusted Performance

Very Weak

Over the last 90 days Savaria 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 basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Magellan Aerospace and Savaria

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

The idea behind Magellan Aerospace and Savaria 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.