Correlation Between Magna International and Lithium Americas
Can any of the company-specific risk be diversified away by investing in both Magna International and Lithium Americas 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 Lithium Americas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Lithium Americas Corp, you can compare the effects of market volatilities on Magna International and Lithium Americas 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 Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Lithium Americas.
Diversification Opportunities for Magna International and Lithium Americas
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magna and Lithium is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp 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 Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Magna International i.e., Magna International and Lithium Americas go up and down completely randomly.
Pair Corralation between Magna International and Lithium Americas
Considering the 90-day investment horizon Magna International is expected to under-perform the Lithium Americas. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 1.68 times less risky than Lithium Americas. The stock trades about -0.05 of its potential returns per unit of risk. The Lithium Americas Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 296.00 in Lithium Americas Corp on December 23, 2024 and sell it today you would earn a total of 5.00 from holding Lithium Americas Corp or generate 1.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Lithium Americas Corp
Performance |
| Timeline |
| Magna International |
| Lithium Americas Corp |
Magna International and Lithium Americas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Lithium Americas
The main advantage of trading using opposite Magna International and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Lithium Americas 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 Lithium Americas will offset losses from the drop in Lithium Americas' long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| Lithium Americas vs. Sigma Lithium Resources | Lithium Americas vs. Standard Lithium | Lithium Americas vs. Sayona Mining Limited | Lithium Americas vs. MP Materials Corp |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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