Correlation Between Magna International and Garrett Motion
Can any of the company-specific risk be diversified away by investing in both Magna International and Garrett Motion 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 Garrett Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Garrett Motion, you can compare the effects of market volatilities on Magna International and Garrett Motion 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 Garrett Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Garrett Motion.
Diversification Opportunities for Magna International and Garrett Motion
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Magna and Garrett is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Garrett Motion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garrett Motion 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 Garrett Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garrett Motion has no effect on the direction of Magna International i.e., Magna International and Garrett Motion go up and down completely randomly.
Pair Corralation between Magna International and Garrett Motion
Considering the 90-day investment horizon Magna International is expected to under-perform the Garrett Motion. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 1.17 times less risky than Garrett Motion. The stock trades about -0.02 of its potential returns per unit of risk. The Garrett Motion is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 740.00 in Garrett Motion on August 26, 2024 and sell it today you would earn a total of 91.00 from holding Garrett Motion or generate 12.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Garrett Motion
Performance |
| Timeline |
| Magna International |
| Garrett Motion |
Magna International and Garrett Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Garrett Motion
The main advantage of trading using opposite Magna International and Garrett Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Garrett Motion 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 Garrett Motion will offset losses from the drop in Garrett Motion's long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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