Correlation Between Valeo SE and Magna International

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

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

Diversification Opportunities for Valeo SE and Magna International

-0.62

Correlation Coefficient

Valeo SE  Magna International

Excellent diversification

The 3 months correlation between Valeo and Magna is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Valeo SE and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Valeo SE 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 Valeo SE 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 Valeo SE i.e., Valeo SE and Magna International go up and down completely randomly.

Pair Corralation between Valeo SE and Magna International

Assuming the 90 days horizon Valeo SE is expected to generate 3.68 times more return on investment than Magna International. However, Valeo SE is 3.68 times more volatile than Magna International. It trades about 0.23 of its potential returns per unit of risk. Magna International is currently generating about -0.35 per unit of risk. If you would invest  807.00  in Valeo SE on October 10, 2024 and sell it today you would earn a total of  168.00  from holding Valeo SE or generate 20.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Valeo SE  vs.  Magna International

Valeo SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valeo SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Magna International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Magna International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valeo SE and Magna International

The main advantage of trading using opposite Valeo SE and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valeo SE 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 Valeo SE 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.

Check out your portfolio center.

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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.