Correlation Between Magna International and Avient Corp

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Can any of the company-specific risk be diversified away by investing in both Magna International and Avient Corp 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 Avient Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Avient Corp, you can compare the effects of market volatilities on Magna International and Avient Corp 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 Avient Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Avient Corp.

Diversification Opportunities for Magna International and Avient Corp

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Magna and Avient is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient 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 Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of Magna International i.e., Magna International and Avient Corp go up and down completely randomly.

Pair Corralation between Magna International and Avient Corp

Considering the 90-day investment horizon Magna International is expected to generate 1.05 times more return on investment than Avient Corp. However, Magna International is 1.05 times more volatile than Avient Corp. It trades about 0.0 of its potential returns per unit of risk. Avient Corp is currently generating about -0.03 per unit of risk. If you would invest  4,095  in Magna International on October 20, 2024 and sell it today you would lose (60.00) from holding Magna International or give up 1.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Magna International  vs.  Avient Corp

 Performance 
       Timeline  
Magna International 

Risk-Adjusted Performance

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Weak
 
Strong
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 recent stock price disturbance, may contribute to short-term losses for the investors.
Avient Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Avient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Magna International and Avient Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Magna International and Avient Corp

The main advantage of trading using opposite Magna International and Avient Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Avient Corp 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 Avient Corp will offset losses from the drop in Avient Corp's long position.
The idea behind Magna International and Avient 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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