Correlation Between Marine Products and Magna International

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

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

Diversification Opportunities for Marine Products and Magna International

0.74

Correlation Coefficient

Marine Products  Magna International

Poor diversification

The 3 months correlation between Marine and Magna is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Marine Products and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Marine Products 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 Marine Products are associated (or correlated) with Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Marine Products i.e., Marine Products and Magna International go up and down completely randomly.

Pair Corralation between Marine Products and Magna International

Considering the 90-day investment horizon Marine Products is expected to generate 3.16 times less return on investment than Magna International. But when comparing it to its historical volatility, Marine Products is 1.36 times less risky than Magna International. It trades about 0.04 of its potential returns per unit of risk. Magna International is currently generating about 0.1 of returns per unit of risk over similar time horizon. 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Marine Products  vs.  Magna International

Marine Products

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marine Products are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Marine Products and Magna International

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

The idea behind Marine Products and Magna International 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.