Correlation Between Stella Jones and Magna International

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

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

Diversification Opportunities for Stella Jones and Magna International

-0.88

Correlation Coefficient

Stella Jones  Magna International

Pay attention - limited upside

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

Pair Corralation between Stella Jones and Magna International

Assuming the 90 days horizon Stella Jones is expected to under-perform the Magna International. In addition to that, Stella Jones is 1.0 times more volatile than Magna International. It trades about -0.17 of its total potential returns per unit of risk. Magna International is currently generating about 0.11 per unit of volatility. If you would invest  5,508  in Magna International on September 2, 2024 and sell it today you would earn a total of  855.00  from holding Magna International or generate 15.52% return on investment over 90 days.

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

Stella Jones  vs.  Magna International

Stella Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stella Jones 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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Magna International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 9 (%) 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 Stella Jones and Magna International

The main advantage of trading using opposite Stella Jones and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stella Jones 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 Stella Jones 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.