Correlation Between Scandium Canada and Magna International

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

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

Diversification Opportunities for Scandium Canada and Magna International

-0.5

Correlation Coefficient

Scandium Canada  Magna International

Very good diversification

The 3 months correlation between Scandium and Magna is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Scandium Canada and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Scandium Canada 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 Scandium Canada 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 Scandium Canada i.e., Scandium Canada and Magna International go up and down completely randomly.

Pair Corralation between Scandium Canada and Magna International

Assuming the 90 days horizon Scandium Canada is expected to generate 8.18 times more return on investment than Magna International. However, Scandium Canada is 8.18 times more volatile than Magna International. It trades about 0.06 of its potential returns per unit of risk. Magna International is currently generating about 0.13 per unit of risk. If you would invest  2.50  in Scandium Canada on September 13, 2024 and sell it today you would lose (0.50) from holding Scandium Canada or give up 20.0% of portfolio value over 90 days.

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

Scandium Canada  vs.  Magna International

Scandium Canada

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scandium Canada are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Scandium Canada showed solid returns over the last few months and may actually be approaching a breakup point.

Magna International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Magna International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scandium Canada and Magna International

The main advantage of trading using opposite Scandium Canada and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandium Canada 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 Scandium Canada 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .