Correlation Between Magellan Financial and Collins Foods
Can any of the company-specific risk be diversified away by investing in both Magellan Financial and Collins Foods 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 Magellan Financial and Collins Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magellan Financial Group and Collins Foods, you can compare the effects of market volatilities on Magellan Financial and Collins Foods 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 Magellan Financial with a short position of Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Financial and Collins Foods.
Diversification Opportunities for Magellan Financial and Collins Foods
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magellan and Collins is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Financial Group and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods and Magellan Financial 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 Magellan Financial Group are associated (or correlated) with Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of Magellan Financial i.e., Magellan Financial and Collins Foods go up and down completely randomly.
Pair Corralation between Magellan Financial and Collins Foods
Assuming the 90 days trading horizon Magellan Financial Group is expected to generate 1.31 times more return on investment than Collins Foods. However, Magellan Financial is 1.31 times more volatile than Collins Foods. It trades about 0.03 of its potential returns per unit of risk. Collins Foods is currently generating about 0.02 per unit of risk. If you would invest 816.00 in Magellan Financial Group on August 26, 2024 and sell it today you would earn a total of 256.00 from holding Magellan Financial Group or generate 31.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magellan Financial Group vs. Collins Foods
Performance |
| Timeline |
| Magellan Financial |
| Collins Foods |
Magellan Financial and Collins Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magellan Financial and Collins Foods
The main advantage of trading using opposite Magellan Financial and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Financial position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.| Magellan Financial vs. National Australia Bank | Magellan Financial vs. National Australia Bank | Magellan Financial vs. Westpac Banking | Magellan Financial vs. National Australia Bank |
| Collins Foods vs. Australian Agricultural | Collins Foods vs. Super Retail Group | Collins Foods vs. ABACUS STORAGE KING | Collins Foods vs. Qbe Insurance Group |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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