Correlation Between Magna International and Miller Industries
Can any of the company-specific risk be diversified away by investing in both Magna International and Miller Industries 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 Miller Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Miller Industries, you can compare the effects of market volatilities on Magna International and Miller Industries 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 Miller Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Miller Industries.
Diversification Opportunities for Magna International and Miller Industries
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magna and Miller is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Miller Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Industries 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 Miller Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Industries has no effect on the direction of Magna International i.e., Magna International and Miller Industries go up and down completely randomly.
Pair Corralation between Magna International and Miller Industries
Considering the 90-day investment horizon Magna International is expected to under-perform the Miller Industries. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 1.17 times less risky than Miller Industries. The stock trades about -0.03 of its potential returns per unit of risk. The Miller Industries is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,960 in Miller Industries on August 27, 2024 and sell it today you would earn a total of 3,233 from holding Miller Industries or generate 81.64% 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. Miller Industries
Performance |
| Timeline |
| Magna International |
| Miller Industries |
Magna International and Miller Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Miller Industries
The main advantage of trading using opposite Magna International and Miller Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Miller Industries 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 Miller Industries will offset losses from the drop in Miller Industries' long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| Miller Industries vs. Dorman Products | Miller Industries vs. Standard Motor Products | Miller Industries vs. Motorcar Parts of | Miller Industries 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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