Correlation Between Magna International and Paragon GmbH

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

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

Diversification Opportunities for Magna International and Paragon GmbH

-0.07

Correlation Coefficient

Magna International  Paragon GmbH

Good diversification

The 3 months correlation between Magna and Paragon is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and paragon GmbH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on paragon GmbH 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 Paragon GmbH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of paragon GmbH has no effect on the direction of Magna International i.e., Magna International and Paragon GmbH go up and down completely randomly.

Pair Corralation between Magna International and Paragon GmbH

Assuming the 90 days horizon Magna International is expected to generate 0.42 times more return on investment than Paragon GmbH. However, Magna International is 2.38 times less risky than Paragon GmbH. It trades about -0.02 of its potential returns per unit of risk. paragon GmbH Co is currently generating about -0.04 per unit of risk. If you would invest  4,818  in Magna International on October 22, 2024 and sell it today you would lose (885.00) from holding Magna International or give up 18.37% of portfolio value over 90 days.

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

Magna International  vs.  paragon GmbH Co

Magna International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Magna International is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

paragon GmbH

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in paragon GmbH Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Paragon GmbH may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Magna International and Paragon GmbH

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

The idea behind Magna International and paragon GmbH Co 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.