Correlation Between Magna International and Pure Cycle
Can any of the company-specific risk be diversified away by investing in both Magna International and Pure Cycle 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 Pure Cycle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Pure Cycle, you can compare the effects of market volatilities on Magna International and Pure Cycle 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 Pure Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Pure Cycle.
Diversification Opportunities for Magna International and Pure Cycle
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Magna and Pure is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle 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 Pure Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Cycle has no effect on the direction of Magna International i.e., Magna International and Pure Cycle go up and down completely randomly.
Pair Corralation between Magna International and Pure Cycle
Considering the 90-day investment horizon Magna International is expected to under-perform the Pure Cycle. But the stock apears to be less risky and, when comparing its historical volatility, Magna International is 1.05 times less risky than Pure Cycle. The stock trades about -0.02 of its potential returns per unit of risk. The Pure Cycle is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,015 in Pure Cycle on September 2, 2024 and sell it today you would earn a total of 439.00 from holding Pure Cycle or generate 43.25% 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. Pure Cycle
Performance |
| Timeline |
| Magna International |
| Pure Cycle |
Magna International and Pure Cycle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Pure Cycle
The main advantage of trading using opposite Magna International and Pure Cycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Pure Cycle 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 Pure Cycle will offset losses from the drop in Pure Cycle's long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| Pure Cycle vs. Cadiz Inc | Pure Cycle vs. Artesian Resources | Pure Cycle vs. Global Water Resources | Pure Cycle vs. Parke Bancorp |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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