Correlation Between Magna International and Douglas Dynamics
Can any of the company-specific risk be diversified away by investing in both Magna International and Douglas Dynamics 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 Douglas Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Douglas Dynamics, you can compare the effects of market volatilities on Magna International and Douglas Dynamics 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 Douglas Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Douglas Dynamics.
Diversification Opportunities for Magna International and Douglas Dynamics
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magna and Douglas is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Douglas Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Dynamics 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 Douglas Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Dynamics has no effect on the direction of Magna International i.e., Magna International and Douglas Dynamics go up and down completely randomly.
Pair Corralation between Magna International and Douglas Dynamics
Considering the 90-day investment horizon Magna International is expected to under-perform the Douglas Dynamics. In addition to that, Magna International is 1.19 times more volatile than Douglas Dynamics. It trades about -0.1 of its total potential returns per unit of risk. Douglas Dynamics is currently generating about 0.29 per unit of volatility. If you would invest 2,369 in Douglas Dynamics on November 3, 2024 and sell it today you would earn a total of 216.00 from holding Douglas Dynamics or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Douglas Dynamics
Performance |
| Timeline |
| Magna International |
| Douglas Dynamics |
Magna International and Douglas Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Douglas Dynamics
The main advantage of trading using opposite Magna International and Douglas Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Douglas Dynamics 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 Douglas Dynamics will offset losses from the drop in Douglas Dynamics' long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| Douglas Dynamics vs. Monro Muffler Brake | Douglas Dynamics vs. Motorcar Parts of | Douglas Dynamics vs. Standard Motor Products | Douglas Dynamics vs. Stoneridge |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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