Correlation Between Collins Foods and Magellan Financial
Can any of the company-specific risk be diversified away by investing in both Collins Foods and Magellan Financial 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 Collins Foods and Magellan Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collins Foods and Magellan Financial Group, you can compare the effects of market volatilities on Collins Foods and Magellan Financial 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 Collins Foods with a short position of Magellan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collins Foods and Magellan Financial.
Diversification Opportunities for Collins Foods and Magellan Financial
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Collins and Magellan is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Magellan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Financial and Collins Foods 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 Collins Foods are associated (or correlated) with Magellan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Financial has no effect on the direction of Collins Foods i.e., Collins Foods and Magellan Financial go up and down completely randomly.
Pair Corralation between Collins Foods and Magellan Financial
Assuming the 90 days trading horizon Collins Foods is expected to under-perform the Magellan Financial. But the stock apears to be less risky and, when comparing its historical volatility, Collins Foods is 1.14 times less risky than Magellan Financial. The stock trades about -0.01 of its potential returns per unit of risk. The Magellan Financial Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 790.00 in Magellan Financial Group on August 29, 2024 and sell it today you would earn a total of 298.00 from holding Magellan Financial Group or generate 37.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Collins Foods vs. Magellan Financial Group
Performance |
| Timeline |
| Collins Foods |
| Magellan Financial |
Collins Foods and Magellan Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collins Foods and Magellan Financial
The main advantage of trading using opposite Collins Foods and Magellan Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins Foods position performs unexpectedly, Magellan Financial 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 Magellan Financial will offset losses from the drop in Magellan Financial's long position.| Collins Foods vs. Summit Resources Limited | Collins Foods vs. Champion Iron | Collins Foods vs. Ridley | Collins Foods vs. Peel Mining |
| Magellan Financial vs. Champion Iron | Magellan Financial vs. Ridley | Magellan Financial vs. Peel Mining | Magellan Financial vs. Australian Dairy Farms |
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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