Correlation Between Magna International and Grupo Industrial

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

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

Diversification Opportunities for Magna International and Grupo Industrial

-0.66

Correlation Coefficient

Magna International  Grupo Industrial

Excellent diversification

The 3 months correlation between Magna and Grupo is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Grupo Industrial Saltillo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Industrial Saltillo 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 Grupo Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Industrial Saltillo has no effect on the direction of Magna International i.e., Magna International and Grupo Industrial go up and down completely randomly.

Pair Corralation between Magna International and Grupo Industrial

Assuming the 90 days trading horizon Magna International is expected to generate 1.57 times more return on investment than Grupo Industrial. However, Magna International is 1.57 times more volatile than Grupo Industrial Saltillo. It trades about 0.23 of its potential returns per unit of risk. Grupo Industrial Saltillo is currently generating about 0.28 per unit of risk. If you would invest  83,831  in Magna International on October 12, 2024 and sell it today you would earn a total of  5,069  from holding Magna International or generate 6.05% return on investment over 90 days.

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

Magna International  vs.  Grupo Industrial Saltillo

Magna International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Magna International showed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Industrial Saltillo

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Magna International and Grupo Industrial

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

The idea behind Magna International and Grupo Industrial Saltillo 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.