Correlation Between Magna International and Westport Fuel
Can any of the company-specific risk be diversified away by investing in both Magna International and Westport Fuel 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 Westport Fuel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Westport Fuel Systems, you can compare the effects of market volatilities on Magna International and Westport Fuel 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 Westport Fuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Westport Fuel.
Diversification Opportunities for Magna International and Westport Fuel
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Magna and Westport is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Westport Fuel Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westport Fuel Systems 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 Westport Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westport Fuel Systems has no effect on the direction of Magna International i.e., Magna International and Westport Fuel go up and down completely randomly.
Pair Corralation between Magna International and Westport Fuel
Assuming the 90 days horizon Magna International is expected to generate 1.17 times more return on investment than Westport Fuel. However, Magna International is 1.17 times more volatile than Westport Fuel Systems. It trades about 0.18 of its potential returns per unit of risk. Westport Fuel Systems is currently generating about 0.12 per unit of risk. If you would invest 5,790 in Magna International on August 26, 2024 and sell it today you would earn a total of 515.00 from holding Magna International or generate 8.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Westport Fuel Systems
Performance |
| Timeline |
| Magna International |
| Westport Fuel Systems |
Magna International and Westport Fuel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Westport Fuel
The main advantage of trading using opposite Magna International and Westport Fuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Westport Fuel 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 Westport Fuel will offset losses from the drop in Westport Fuel'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 |
| Westport Fuel vs. Martinrea International | Westport Fuel vs. Magna International | Westport Fuel vs. CCL Industries | Westport Fuel 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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