Correlation Between IDP EDUCATION and Magna International
Can any of the company-specific risk be diversified away by investing in both IDP EDUCATION 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 IDP EDUCATION and Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDP EDUCATION LTD and Magna International, you can compare the effects of market volatilities on IDP EDUCATION 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 IDP EDUCATION with a short position of Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDP EDUCATION and Magna International.
Diversification Opportunities for IDP EDUCATION and Magna International
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IDP and Magna is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding IDP EDUCATION LTD and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and IDP EDUCATION 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 IDP EDUCATION LTD 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 IDP EDUCATION i.e., IDP EDUCATION and Magna International go up and down completely randomly.
Pair Corralation between IDP EDUCATION and Magna International
Assuming the 90 days horizon IDP EDUCATION LTD is expected to under-perform the Magna International. In addition to that, IDP EDUCATION is 2.93 times more volatile than Magna International. It trades about -0.11 of its total potential returns per unit of risk. Magna International is currently generating about -0.14 per unit of volatility. If you would invest 3,631 in Magna International on December 9, 2024 and sell it today you would lose (259.00) from holding Magna International or give up 7.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDP EDUCATION LTD vs. Magna International
Performance |
| Timeline |
| IDP EDUCATION LTD |
| Magna International |
IDP EDUCATION and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDP EDUCATION and Magna International
The main advantage of trading using opposite IDP EDUCATION and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDP EDUCATION 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.| IDP EDUCATION vs. REGAL ASIAN INVESTMENTS | ||
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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