Correlation Between Magna International and Linamar
Can any of the company-specific risk be diversified away by investing in both Magna International and Linamar 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 Magna International and Linamar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Linamar, you can compare the effects of market volatilities on Magna International and Linamar 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 Magna International with a short position of Linamar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Linamar.
Diversification Opportunities for Magna International and Linamar
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Magna and Linamar is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar and Magna International 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 Magna International are associated (or correlated) with Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of Magna International i.e., Magna International and Linamar go up and down completely randomly.
Pair Corralation between Magna International and Linamar
Assuming the 90 days horizon Magna International is expected to under-perform the Linamar. In addition to that, Magna International is 1.0 times more volatile than Linamar. It trades about -0.09 of its total potential returns per unit of risk. Linamar is currently generating about 0.02 per unit of volatility. If you would invest 5,629 in Linamar on November 3, 2024 and sell it today you would earn a total of 25.00 from holding Linamar or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Linamar
Performance |
| Timeline |
| Magna International |
| Linamar |
Magna International and Linamar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Linamar
The main advantage of trading using opposite Magna International and Linamar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Linamar 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 Linamar will offset losses from the drop in Linamar's long position.| Magna International vs. Canadian National Railway | Magna International vs. Nutrien | Magna International vs. Restaurant Brands International | Magna International vs. Canadian Pacific Railway |
| Linamar vs. Martinrea International | Linamar vs. Magna International | Linamar vs. CCL Industries | Linamar vs. Stella Jones |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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