Correlation Between Magna International and Compagnie Plastic

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

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

Diversification Opportunities for Magna International and Compagnie Plastic

0.13

Correlation Coefficient

Magna International  Compagnie Plastic

Average diversification

The 3 months correlation between Magna and Compagnie is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Compagnie Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Plastic Omnium 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 Compagnie Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Plastic Omnium has no effect on the direction of Magna International i.e., Magna International and Compagnie Plastic go up and down completely randomly.

Pair Corralation between Magna International and Compagnie Plastic

Assuming the 90 days horizon Magna International is expected to generate 2.62 times less return on investment than Compagnie Plastic. But when comparing it to its historical volatility, Magna International is 1.12 times less risky than Compagnie Plastic. It trades about 0.07 of its potential returns per unit of risk. Compagnie Plastic Omnium is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  829.00  in Compagnie Plastic Omnium on October 12, 2024 and sell it today you would earn a total of  223.00  from holding Compagnie Plastic Omnium or generate 26.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Magna International  vs.  Compagnie Plastic Omnium

Magna International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Magna International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Compagnie Plastic Omnium

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compagnie Plastic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magna International and Compagnie Plastic

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

The idea behind Magna International and Compagnie Plastic Omnium 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.