Correlation Between Magna International and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Magna International and NorAm Drilling 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 NorAm Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and NorAm Drilling AS, you can compare the effects of market volatilities on Magna International and NorAm Drilling 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 NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and NorAm Drilling.
Diversification Opportunities for Magna International and NorAm Drilling
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Magna and NorAm is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Magna International i.e., Magna International and NorAm Drilling go up and down completely randomly.
Pair Corralation between Magna International and NorAm Drilling
Assuming the 90 days horizon Magna International is expected to generate 0.6 times more return on investment than NorAm Drilling. However, Magna International is 1.67 times less risky than NorAm Drilling. It trades about 0.16 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.03 per unit of risk. If you would invest 3,804 in Magna International on August 31, 2024 and sell it today you would earn a total of 386.00 from holding Magna International or generate 10.15% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Magna International vs. NorAm Drilling AS
Performance |
Timeline |
Magna International |
NorAm Drilling AS |
Magna International and NorAm Drilling Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Magna International and NorAm Drilling
The main advantage of trading using opposite Magna International and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, NorAm Drilling 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.Magna International vs. Wizz Air Holdings | Magna International vs. Alaska Air Group | Magna International vs. CENTURIA OFFICE REIT | Magna International vs. Aedas Homes SA |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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