Correlation Between Magna International and Lifevantage

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

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

Diversification Opportunities for Magna International and Lifevantage

0.67

Correlation Coefficient

Magna International  Lifevantage

Poor diversification

The 3 months correlation between Magna and Lifevantage is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage 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 Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of Magna International i.e., Magna International and Lifevantage go up and down completely randomly.

Pair Corralation between Magna International and Lifevantage

Considering the 90-day investment horizon Magna International is expected to under-perform the Lifevantage. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 2.1 times less risky than Lifevantage. The stock trades about -0.01 of its potential returns per unit of risk. The Lifevantage is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  337.00  in Lifevantage on September 20, 2024 and sell it today you would earn a total of  1,436  from holding Lifevantage or generate 426.11% return on investment over 90 days.

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

Magna International  vs.  Lifevantage

Magna International

Risk-Adjusted Performance

0 of 100

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.

Lifevantage

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifevantage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magna International and Lifevantage

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

The idea behind Magna International and Lifevantage 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.