Correlation Between United States and Magnite

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

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

Diversification Opportunities for United States and Magnite

0.43

Correlation Coefficient

United States  Magnite

Very weak diversification

The 3 months correlation between United and Magnite is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Magnite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnite and United States 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 United States Steel are associated (or correlated) with Magnite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnite has no effect on the direction of United States i.e., United States and Magnite go up and down completely randomly.

Pair Corralation between United States and Magnite

Taking into account the 90-day investment horizon United States Steel is expected to generate 1.04 times more return on investment than Magnite. However, United States is 1.04 times more volatile than Magnite. It trades about 0.01 of its potential returns per unit of risk. Magnite is currently generating about -0.03 per unit of risk. If you would invest  4,089  in United States Steel on December 2, 2024 and sell it today you would lose (67.00) from holding United States Steel or give up 1.64% of portfolio value over 90 days.

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

United States Steel  vs.  Magnite

United States Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, United States is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Magnite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magnite has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Magnite is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with United States and Magnite

The main advantage of trading using opposite United States and Magnite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Magnite 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 Magnite will offset losses from the drop in Magnite's long position.

The idea behind United States Steel and Magnite 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.