Correlation Between Magna International and Affiliated Resources

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

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

Diversification Opportunities for Magna International and Affiliated Resources

0.4

Correlation Coefficient

Magna International  Affiliated Resources

Very weak diversification

The 3 months correlation between Magna and Affiliated is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Affiliated Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affiliated Resources Corp 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 Affiliated Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affiliated Resources Corp has no effect on the direction of Magna International i.e., Magna International and Affiliated Resources go up and down completely randomly.

Pair Corralation between Magna International and Affiliated Resources

Considering the 90-day investment horizon Magna International is expected to under-perform the Affiliated Resources. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 6.1 times less risky than Affiliated Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Affiliated Resources Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Affiliated Resources Corp on October 25, 2024 and sell it today you would lose (2.52) from holding Affiliated Resources Corp or give up 28.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Magna International  vs.  Affiliated Resources Corp

Magna International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magna International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Magna International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Affiliated Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Affiliated Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite fragile technical and fundamental indicators, Affiliated Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Magna International and Affiliated Resources

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

The idea behind Magna International and Affiliated Resources Corp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.