Correlation Between Magna International and Continental
Can any of the company-specific risk be diversified away by investing in both Magna International and Continental 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 Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Continental AG PK, you can compare the effects of market volatilities on Magna International and Continental 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 Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Continental.
Diversification Opportunities for Magna International and Continental
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Magna and Continental is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Continental AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental AG PK 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 Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental AG PK has no effect on the direction of Magna International i.e., Magna International and Continental go up and down completely randomly.
Pair Corralation between Magna International and Continental
Considering the 90-day investment horizon Magna International is expected to generate 0.8 times more return on investment than Continental. However, Magna International is 1.25 times less risky than Continental. It trades about 0.12 of its potential returns per unit of risk. Continental AG PK is currently generating about 0.02 per unit of risk. If you would invest 4,060 in Magna International on August 30, 2024 and sell it today you would earn a total of 435.00 from holding Magna International or generate 10.71% 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. Continental AG PK
Performance |
| Timeline |
| Magna International |
| Continental AG PK |
Magna International and Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Continental
The main advantage of trading using opposite Magna International and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| Continental vs. Compagnie Gnrale des | Continental vs. Bridgestone Corp ADR | Continental vs. Continental Aktiengesellschaft | Continental vs. Douglas Dynamics |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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