Correlation Between Bridgestone and Magna International
Can any of the company-specific risk be diversified away by investing in both Bridgestone 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 Bridgestone and Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bridgestone and Magna International, you can compare the effects of market volatilities on Bridgestone 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 Bridgestone with a short position of Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgestone and Magna International.
Diversification Opportunities for Bridgestone and Magna International
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bridgestone and Magna is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Bridgestone 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 Bridgestone 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 Bridgestone i.e., Bridgestone and Magna International go up and down completely randomly.
Pair Corralation between Bridgestone and Magna International
Assuming the 90 days trading horizon Bridgestone is expected to generate 2.66 times less return on investment than Magna International. But when comparing it to its historical volatility, Bridgestone is 1.64 times less risky than Magna International. It trades about 0.02 of its potential returns per unit of risk. Magna International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,750 in Magna International on November 2, 2024 and sell it today you would earn a total of 181.00 from holding Magna International or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bridgestone vs. Magna International
Performance |
| Timeline |
| Bridgestone |
| Magna International |
Bridgestone and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bridgestone and Magna International
The main advantage of trading using opposite Bridgestone and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgestone 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.| Bridgestone vs. Autohome ADR | Bridgestone vs. Quaker Chemical | Bridgestone vs. SILICON LABORATOR | Bridgestone vs. Addus HomeCare |
| Magna International vs. PennyMac Mortgage Investment | Magna International vs. CSSC Offshore Marine | Magna International vs. SEI INVESTMENTS | Magna International vs. BW OFFSHORE LTD |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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