Correlation Between NextTrip and Magna International

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

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

Diversification Opportunities for NextTrip and Magna International

0.59

Correlation Coefficient

NextTrip  Magna International

Very weak diversification

The 3 months correlation between NextTrip and Magna is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NextTrip and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and NextTrip 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 NextTrip 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 NextTrip i.e., NextTrip and Magna International go up and down completely randomly.

Pair Corralation between NextTrip and Magna International

Given the investment horizon of 90 days NextTrip is expected to generate 3.32 times more return on investment than Magna International. However, NextTrip is 3.32 times more volatile than Magna International. It trades about 0.02 of its potential returns per unit of risk. Magna International is currently generating about -0.1 per unit of risk. If you would invest  632.00  in NextTrip on December 28, 2024 and sell it today you would lose (48.00) from holding NextTrip or give up 7.59% of portfolio value over 90 days.

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

NextTrip  vs.  Magna International

NextTrip

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NextTrip are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, NextTrip may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NextTrip and Magna International

The main advantage of trading using opposite NextTrip and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextTrip 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 NextTrip 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.