Correlation Between Royal Bank and Magna International

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

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

Diversification Opportunities for Royal Bank and Magna International

0.01

Correlation Coefficient

Royal Bank  Magna International

Significant diversification

The 3 months correlation between Royal and Magna is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Royal Bank 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 Royal Bank of 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 Royal Bank i.e., Royal Bank and Magna International go up and down completely randomly.

Pair Corralation between Royal Bank and Magna International

Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.16 times more return on investment than Magna International. However, Royal Bank of is 6.27 times less risky than Magna International. It trades about -0.01 of its potential returns per unit of risk. Magna International is currently generating about -0.13 per unit of risk. If you would invest  2,556  in Royal Bank of on December 29, 2024 and sell it today you would lose (7.00) from holding Royal Bank of or give up 0.27% of portfolio value over 90 days.

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

Royal Bank of  vs.  Magna International

Royal Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Royal Bank is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private 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 Royal Bank and Magna International

The main advantage of trading using opposite Royal Bank and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank 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 Royal Bank of 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.