Correlation Between Martinrea International and MDA

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

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

Diversification Opportunities for Martinrea International and MDA

-0.83

Correlation Coefficient

Martinrea International  MDA

Pay attention - limited upside

The 3 months correlation between Martinrea and MDA is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Martinrea International and MDA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDA and Martinrea 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 Martinrea International are associated (or correlated) with MDA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDA has no effect on the direction of Martinrea International i.e., Martinrea International and MDA go up and down completely randomly.

Pair Corralation between Martinrea International and MDA

Assuming the 90 days trading horizon Martinrea International is expected to under-perform the MDA. But the stock apears to be less risky and, when comparing its historical volatility, Martinrea International is 1.03 times less risky than MDA. The stock trades about -0.09 of its potential returns per unit of risk. The MDA is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  1,669  in MDA on September 15, 2024 and sell it today you would earn a total of  1,181  from holding MDA or generate 70.76% return on investment over 90 days.

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

Martinrea International  vs.  MDA

Martinrea International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Martinrea International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

MDA

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in MDA are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MDA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Martinrea International and MDA

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

The idea behind Martinrea International and MDA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.