Correlation Between Magna International and Martinrea International

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

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

Diversification Opportunities for Magna International and Martinrea International

0.88

Correlation Coefficient

Magna International  Martinrea International

Very poor diversification

The 3 months correlation between Magna and Martinrea is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Martinrea International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martinrea International and Magna International 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 Magna International 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 Magna International i.e., Magna International and Martinrea International go up and down completely randomly.

Pair Corralation between Magna International and Martinrea International

Assuming the 90 days horizon Magna International is expected to generate 1.34 times more return on investment than Martinrea International. However, Magna International is 1.34 times more volatile than Martinrea International. It trades about -0.13 of its potential returns per unit of risk. Martinrea International is currently generating about -0.19 per unit of risk. If you would invest  5,936  in Magna International on December 30, 2024 and sell it today you would lose (1,066) from holding Magna International or give up 17.96% of portfolio value over 90 days.

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

Magna International  vs.  Martinrea International

Magna International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magna 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 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.

Martinrea International

Risk-Adjusted Performance

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Magna International and Martinrea International

The main advantage of trading using opposite Magna International and Martinrea International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International 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 Magna International 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.