Correlation Between Magna International and Bridgestone Corp
Can any of the company-specific risk be diversified away by investing in both Magna International and Bridgestone Corp 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 Corp 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 Corp ADR, you can compare the effects of market volatilities on Magna International and Bridgestone Corp 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 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Bridgestone Corp.
Diversification Opportunities for Magna International and Bridgestone Corp
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Magna and Bridgestone is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Bridgestone Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone Corp 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 Bridgestone Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone Corp ADR has no effect on the direction of Magna International i.e., Magna International and Bridgestone Corp go up and down completely randomly.
Pair Corralation between Magna International and Bridgestone Corp
Considering the 90-day investment horizon Magna International is expected to under-perform the Bridgestone Corp. In addition to that, Magna International is 1.07 times more volatile than Bridgestone Corp ADR. It trades about -0.11 of its total potential returns per unit of risk. Bridgestone Corp ADR is currently generating about 0.05 per unit of volatility. If you would invest 1,697 in Bridgestone Corp ADR on October 23, 2024 and sell it today you would earn a total of 16.00 from holding Bridgestone Corp ADR or generate 0.94% 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 Corp ADR
Performance |
| Timeline |
| Magna International |
| Bridgestone Corp ADR |
Magna International and Bridgestone Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Bridgestone Corp
The main advantage of trading using opposite Magna International and Bridgestone Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Bridgestone Corp 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 Corp will offset losses from the drop in Bridgestone Corp's long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| Bridgestone Corp vs. Continental AG PK | Bridgestone Corp vs. Compagnie Generale des | Bridgestone Corp vs. Denso Corp ADR | Bridgestone Corp vs. Subaru Corp ADR |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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