Correlation Between MAGNA INTL and Dow Jones
Can any of the company-specific risk be diversified away by investing in both MAGNA INTL and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MAGNA INTL and Dow Jones Industrial, you can compare the effects of market volatilities on MAGNA INTL and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGNA INTL and Dow Jones.
Diversification Opportunities for MAGNA INTL and Dow Jones
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MAGNA and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding MAGNA INTL and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of MAGNA INTL i.e., MAGNA INTL and Dow Jones go up and down completely randomly.
Pair Corralation between MAGNA INTL and Dow Jones
Assuming the 90 days trading horizon MAGNA INTL is expected to generate 2.82 times less return on investment than Dow Jones. In addition to that, MAGNA INTL is 2.15 times more volatile than Dow Jones Industrial. It trades about 0.03 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of volatility. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.18% |
| Values | Daily Returns |
MAGNA INTL vs. Dow Jones Industrial
Performance |
| Timeline |
MAGNA INTL and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
MAGNA INTL
Pair trading matchups for MAGNA INTL
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with MAGNA INTL and Dow Jones
The main advantage of trading using opposite MAGNA INTL and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGNA INTL position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| MAGNA INTL vs. Arrow Electronics | MAGNA INTL vs. Citic Telecom International | MAGNA INTL vs. Nucletron Electronic Aktiengesellschaft | MAGNA INTL vs. ELECTRONIC ARTS |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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