Correlation Between Magna International and ECARX Holdings

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

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

Diversification Opportunities for Magna International and ECARX Holdings

0.13

Correlation Coefficient

Magna International  ECARX Holdings

Average diversification

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

Pair Corralation between Magna International and ECARX Holdings

Considering the 90-day investment horizon Magna International is expected to generate 1.3 times less return on investment than ECARX Holdings. But when comparing it to its historical volatility, Magna International is 2.02 times less risky than ECARX Holdings. It trades about 0.09 of its potential returns per unit of risk. ECARX Holdings Class is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  178.00  in ECARX Holdings Class on September 15, 2024 and sell it today you would earn a total of  19.00  from holding ECARX Holdings Class or generate 10.67% return on investment over 90 days.

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

Magna International  vs.  ECARX Holdings Class

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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ECARX Holdings Class

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Class are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, ECARX Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magna International and ECARX Holdings

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

The idea behind Magna International and ECARX Holdings Class 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.