Correlation Between Apple and MAGNA INTL
Can any of the company-specific risk be diversified away by investing in both Apple and MAGNA INTL 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 Apple and MAGNA INTL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and MAGNA INTL, you can compare the effects of market volatilities on Apple and MAGNA INTL 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 Apple with a short position of MAGNA INTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and MAGNA INTL.
Diversification Opportunities for Apple and MAGNA INTL
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Apple and MAGNA is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and MAGNA INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGNA INTL and Apple 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 Apple Inc are associated (or correlated) with MAGNA INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAGNA INTL has no effect on the direction of Apple i.e., Apple and MAGNA INTL go up and down completely randomly.
Pair Corralation between Apple and MAGNA INTL
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.93 times more return on investment than MAGNA INTL. However, Apple Inc is 1.07 times less risky than MAGNA INTL. It trades about 0.13 of its potential returns per unit of risk. MAGNA INTL is currently generating about 0.03 per unit of risk. If you would invest 17,720 in Apple Inc on September 1, 2024 and sell it today you would earn a total of 4,730 from holding Apple Inc or generate 26.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.24% |
| Values | Daily Returns |
Apple Inc vs. MAGNA INTL
Performance |
| Timeline |
| Apple Inc |
| MAGNA INTL |
Apple and MAGNA INTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and MAGNA INTL
The main advantage of trading using opposite Apple and MAGNA INTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, MAGNA INTL 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 INTL will offset losses from the drop in MAGNA INTL's long position.The idea behind Apple Inc and MAGNA INTL 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.| MAGNA INTL vs. Arrow Electronics | MAGNA INTL vs. Citic Telecom International | MAGNA INTL vs. Nucletron Electronic Aktiengesellschaft | MAGNA INTL vs. ELECTRONIC ARTS |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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