Correlation Between MAGNA INTL and Chiba Bank
Can any of the company-specific risk be diversified away by investing in both MAGNA INTL and Chiba Bank 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 INTL and Chiba Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MAGNA INTL and Chiba Bank, you can compare the effects of market volatilities on MAGNA INTL and Chiba Bank 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 INTL with a short position of Chiba Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGNA INTL and Chiba Bank.
Diversification Opportunities for MAGNA INTL and Chiba Bank
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MAGNA and Chiba is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding MAGNA INTL and Chiba Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank and MAGNA INTL 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 INTL are associated (or correlated) with Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of MAGNA INTL i.e., MAGNA INTL and Chiba Bank go up and down completely randomly.
Pair Corralation between MAGNA INTL and Chiba Bank
Assuming the 90 days trading horizon MAGNA INTL is expected to under-perform the Chiba Bank. But the stock apears to be less risky and, when comparing its historical volatility, MAGNA INTL is 1.24 times less risky than Chiba Bank. The stock trades about -0.01 of its potential returns per unit of risk. The Chiba Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 615.00 in Chiba Bank on September 12, 2024 and sell it today you would earn a total of 180.00 from holding Chiba Bank or generate 29.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.7% |
| Values | Daily Returns |
MAGNA INTL vs. Chiba Bank
Performance |
| Timeline |
| MAGNA INTL |
| Chiba Bank |
MAGNA INTL and Chiba Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGNA INTL and Chiba Bank
The main advantage of trading using opposite MAGNA INTL and Chiba Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGNA INTL position performs unexpectedly, Chiba Bank 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 Chiba Bank will offset losses from the drop in Chiba Bank's long position.| MAGNA INTL vs. Singapore Airlines Limited | MAGNA INTL vs. BE Semiconductor Industries | MAGNA INTL vs. Perseus Mining Limited | MAGNA INTL vs. Evolution Mining Limited |
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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