Correlation Between Magna International and Brunswick

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

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

Diversification Opportunities for Magna International and Brunswick

-0.14

Correlation Coefficient

Magna International  Brunswick

Good diversification

The 3 months correlation between Magna and Brunswick is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Brunswick in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick 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 Brunswick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunswick has no effect on the direction of Magna International i.e., Magna International and Brunswick go up and down completely randomly.

Pair Corralation between Magna International and Brunswick

Considering the 90-day investment horizon Magna International is expected to generate 1.09 times more return on investment than Brunswick. However, Magna International is 1.09 times more volatile than Brunswick. It trades about 0.1 of its potential returns per unit of risk. Brunswick is currently generating about -0.04 per unit of risk. If you would invest  3,971  in Magna International on September 14, 2024 and sell it today you would earn a total of  519.00  from holding Magna International or generate 13.07% return on investment over 90 days.

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

Magna International  vs.  Brunswick

Magna International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Magna International sustained solid returns over the last few months and may actually be approaching a breakup point.

Brunswick

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brunswick has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Brunswick is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Magna International and Brunswick

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

The idea behind Magna International and Brunswick 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.