Correlation Between Magna International and Commercial Vehicle
Can any of the company-specific risk be diversified away by investing in both Magna International and Commercial Vehicle 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 Commercial Vehicle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Commercial Vehicle Group, you can compare the effects of market volatilities on Magna International and Commercial Vehicle 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 Commercial Vehicle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Commercial Vehicle.
Diversification Opportunities for Magna International and Commercial Vehicle
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Magna and Commercial is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Commercial Vehicle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Vehicle 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 Commercial Vehicle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Vehicle has no effect on the direction of Magna International i.e., Magna International and Commercial Vehicle go up and down completely randomly.
Pair Corralation between Magna International and Commercial Vehicle
Considering the 90-day investment horizon Magna International is expected to generate 0.35 times more return on investment than Commercial Vehicle. However, Magna International is 2.87 times less risky than Commercial Vehicle. It trades about 0.19 of its potential returns per unit of risk. Commercial Vehicle Group is currently generating about -0.14 per unit of risk. If you would invest 4,250 in Magna International on August 27, 2024 and sell it today you would earn a total of 396.00 from holding Magna International or generate 9.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Commercial Vehicle Group
Performance |
| Timeline |
| Magna International |
| Commercial Vehicle |
Magna International and Commercial Vehicle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Commercial Vehicle
The main advantage of trading using opposite Magna International and Commercial Vehicle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Commercial Vehicle 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 Commercial Vehicle will offset losses from the drop in Commercial Vehicle's long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| Commercial Vehicle vs. Motorcar Parts of | Commercial Vehicle vs. Monro Muffler Brake | Commercial Vehicle vs. Stoneridge | Commercial Vehicle vs. Superior Industries 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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