Correlation Between Magna International and Bridgestone
Can any of the company-specific risk be diversified away by investing in both Magna International and Bridgestone 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 Bridgestone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Bridgestone, you can compare the effects of market volatilities on Magna International and Bridgestone 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 Bridgestone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Bridgestone.
Diversification Opportunities for Magna International and Bridgestone
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Magna and Bridgestone is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Bridgestone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone 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 Bridgestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone has no effect on the direction of Magna International i.e., Magna International and Bridgestone go up and down completely randomly.
Pair Corralation between Magna International and Bridgestone
Assuming the 90 days horizon Magna International is expected to generate 1.64 times more return on investment than Bridgestone. However, Magna International is 1.64 times more volatile than Bridgestone. It trades about 0.03 of its potential returns per unit of risk. Bridgestone is currently generating about 0.02 per unit of risk. If you would invest 3,750 in Magna International on November 2, 2024 and sell it today you would earn a total of 181.00 from holding Magna International or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Bridgestone
Performance |
| Timeline |
| Magna International |
| Bridgestone |
Magna International and Bridgestone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Bridgestone
The main advantage of trading using opposite Magna International and Bridgestone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Bridgestone 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 Bridgestone will offset losses from the drop in Bridgestone's long position.| Magna International vs. PennyMac Mortgage Investment | Magna International vs. CSSC Offshore Marine | Magna International vs. SEI INVESTMENTS | Magna International vs. BW OFFSHORE LTD |
| Bridgestone vs. Autohome ADR | Bridgestone vs. Quaker Chemical | Bridgestone vs. SILICON LABORATOR | Bridgestone vs. Addus HomeCare |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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