Correlation Between Magna International and DENSO P
Can any of the company-specific risk be diversified away by investing in both Magna International and DENSO P 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 DENSO P into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and DENSO P ADR, you can compare the effects of market volatilities on Magna International and DENSO P 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 DENSO P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and DENSO P.
Diversification Opportunities for Magna International and DENSO P
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magna and DENSO is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and DENSO P ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO P ADR 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 DENSO P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO P ADR has no effect on the direction of Magna International i.e., Magna International and DENSO P go up and down completely randomly.
Pair Corralation between Magna International and DENSO P
Assuming the 90 days horizon Magna International is expected to generate 1.25 times more return on investment than DENSO P. However, Magna International is 1.25 times more volatile than DENSO P ADR. It trades about -0.12 of its potential returns per unit of risk. DENSO P ADR is currently generating about -0.33 per unit of risk. If you would invest 4,242 in Magna International on September 23, 2024 and sell it today you would lose (192.00) from holding Magna International or give up 4.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. DENSO P ADR
Performance |
| Timeline |
| Magna International |
| DENSO P ADR |
Magna International and DENSO P Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and DENSO P
The main advantage of trading using opposite Magna International and DENSO P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, DENSO P 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 DENSO P will offset losses from the drop in DENSO P's long position.| Magna International vs. Dno ASA | Magna International vs. DENSO P ADR | Magna International vs. Aptiv PLC | Magna International vs. PT Astra International |
| DENSO P vs. Dno ASA | DENSO P vs. Aptiv PLC | DENSO P vs. PT Astra International | DENSO P vs. Magna International |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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