Correlation Between Martinrea International and Magna International

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

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

Diversification Opportunities for Martinrea International and Magna International

0.88

Correlation Coefficient

Martinrea International  Magna International

Very poor diversification

The 3 months correlation between Martinrea and Magna is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Martinrea International and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 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 Martinrea International i.e., Martinrea International and Magna International go up and down completely randomly.

Pair Corralation between Martinrea International and Magna International

Assuming the 90 days trading horizon Martinrea International is expected to under-perform the Magna International. But the stock apears to be less risky and, when comparing its historical volatility, Martinrea International is 1.34 times less risky than Magna International. The stock trades about -0.19 of its potential returns per unit of risk. The Magna International is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  5,936  in Magna International on December 30, 2024 and sell it today you would lose (1,066) from holding Magna International or give up 17.96% of portfolio value over 90 days.

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

Martinrea International  vs.  Magna International

Martinrea International

Risk-Adjusted Performance

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Magna International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magna 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 basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Martinrea International and Magna International

The main advantage of trading using opposite Martinrea International and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martinrea International 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 Martinrea International 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.