Correlation Between Magna International and Kongsberg Automotive
Can any of the company-specific risk be diversified away by investing in both Magna International and Kongsberg Automotive 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 Kongsberg Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Kongsberg Automotive ASA, you can compare the effects of market volatilities on Magna International and Kongsberg Automotive 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 Kongsberg Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Kongsberg Automotive.
Diversification Opportunities for Magna International and Kongsberg Automotive
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Magna and Kongsberg is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Kongsberg Automotive ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kongsberg Automotive ASA 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 Kongsberg Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kongsberg Automotive ASA has no effect on the direction of Magna International i.e., Magna International and Kongsberg Automotive go up and down completely randomly.
Pair Corralation between Magna International and Kongsberg Automotive
Considering the 90-day investment horizon Magna International is expected to under-perform the Kongsberg Automotive. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 8.07 times less risky than Kongsberg Automotive. The stock trades about -0.17 of its potential returns per unit of risk. The Kongsberg Automotive ASA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Kongsberg Automotive ASA on October 24, 2024 and sell it today you would earn a total of 5.00 from holding Kongsberg Automotive ASA or generate 45.45% 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. Kongsberg Automotive ASA
Performance |
| Timeline |
| Magna International |
| Kongsberg Automotive ASA |
Magna International and Kongsberg Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Kongsberg Automotive
The main advantage of trading using opposite Magna International and Kongsberg Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Kongsberg Automotive 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 Kongsberg Automotive will offset losses from the drop in Kongsberg Automotive'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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