Correlation Between Nemak S and Magna International

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

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

Diversification Opportunities for Nemak S and Magna International

-0.72

Correlation Coefficient

Nemak S  Magna International

Pay attention - limited upside

The 3 months correlation between Nemak and Magna is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nemak S A and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Nemak S 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 Nemak S A 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 Nemak S i.e., Nemak S and Magna International go up and down completely randomly.

Pair Corralation between Nemak S and Magna International

Assuming the 90 days trading horizon Nemak S A is expected to generate 1.74 times more return on investment than Magna International. However, Nemak S is 1.74 times more volatile than Magna International. It trades about 0.01 of its potential returns per unit of risk. Magna International is currently generating about -0.1 per unit of risk. If you would invest  273.00  in Nemak S A on December 21, 2024 and sell it today you would lose (3.00) from holding Nemak S A or give up 1.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Nemak S A  vs.  Magna International

Nemak S A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nemak S A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Nemak S is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nemak S and Magna International

The main advantage of trading using opposite Nemak S and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nemak S 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 Nemak S A 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..