Correlation Between Alphabet and MAGNA INTL
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and MAGNA INTL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and MAGNA INTL, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of MAGNA INTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and MAGNA INTL.
Diversification Opportunities for Alphabet and MAGNA INTL
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alphabet and MAGNA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and MAGNA INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAGNA INTL and Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and MAGNA INTL go up and down completely randomly.
Pair Corralation between Alphabet and MAGNA INTL
Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the MAGNA INTL. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.06 times less risky than MAGNA INTL. The stock trades about 0.0 of its potential returns per unit of risk. The MAGNA INTL is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,063 in MAGNA INTL on September 1, 2024 and sell it today you would earn a total of 164.00 from holding MAGNA INTL or generate 4.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.18% |
| Values | Daily Returns |
Alphabet Inc Class C vs. MAGNA INTL
Performance |
| Timeline |
| Alphabet Class C |
| MAGNA INTL |
Alphabet and MAGNA INTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and MAGNA INTL
The main advantage of trading using opposite Alphabet and MAGNA INTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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