Correlation Between Carsales and Magna International
Can any of the company-specific risk be diversified away by investing in both Carsales 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 Carsales and Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom Ltd ADR and Magna International, you can compare the effects of market volatilities on Carsales 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 Carsales with a short position of Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Magna International.
Diversification Opportunities for Carsales and Magna International
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Carsales and Magna is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Carsales 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 CarsalesCom Ltd ADR 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 Carsales i.e., Carsales and Magna International go up and down completely randomly.
Pair Corralation between Carsales and Magna International
Assuming the 90 days horizon Carsales is expected to generate 2.4 times less return on investment than Magna International. In addition to that, Carsales is 1.21 times more volatile than Magna International. It trades about 0.07 of its total potential returns per unit of risk. Magna International is currently generating about 0.19 per unit of volatility. If you would invest 4,250 in Magna International on August 27, 2024 and sell it today you would earn a total of 396.00 from holding Magna International or generate 9.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom Ltd ADR vs. Magna International
Performance |
| Timeline |
| CarsalesCom ADR |
| Magna International |
Carsales and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Magna International
The main advantage of trading using opposite Carsales and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales 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.| Carsales vs. Quizam Media | Carsales vs. DGTL Holdings | Carsales vs. Tinybeans Group Limited | Carsales vs. Sabio Holdings |
| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
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 Stocks Directory module to find actively traded stocks across global markets.
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