Correlation Between Magna International and NiSource
Can any of the company-specific risk be diversified away by investing in both Magna International and NiSource 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 NiSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and NiSource, you can compare the effects of market volatilities on Magna International and NiSource 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 NiSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and NiSource.
Diversification Opportunities for Magna International and NiSource
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Magna and NiSource is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource 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 NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of Magna International i.e., Magna International and NiSource go up and down completely randomly.
Pair Corralation between Magna International and NiSource
Considering the 90-day investment horizon Magna International is expected to generate 2.29 times more return on investment than NiSource. However, Magna International is 2.29 times more volatile than NiSource. It trades about 0.31 of its potential returns per unit of risk. NiSource is currently generating about 0.38 per unit of risk. If you would invest 3,904 in Magna International on September 1, 2024 and sell it today you would earn a total of 610.00 from holding Magna International or generate 15.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. NiSource
Performance |
| Timeline |
| Magna International |
| NiSource |
Magna International and NiSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and NiSource
The main advantage of trading using opposite Magna International and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, NiSource 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 NiSource will offset losses from the drop in NiSource's long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| NiSource vs. NorthWestern | NiSource vs. Avista | NiSource vs. Otter Tail | NiSource vs. Companhia Paranaense de |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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