Correlation Between Magna International and Northstar Clean
Can any of the company-specific risk be diversified away by investing in both Magna International and Northstar Clean 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 Northstar Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Northstar Clean Technologies, you can compare the effects of market volatilities on Magna International and Northstar Clean 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 Northstar Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Northstar Clean.
Diversification Opportunities for Magna International and Northstar Clean
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magna and Northstar is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Northstar Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northstar Clean Tech 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 Northstar Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northstar Clean Tech has no effect on the direction of Magna International i.e., Magna International and Northstar Clean go up and down completely randomly.
Pair Corralation between Magna International and Northstar Clean
Considering the 90-day investment horizon Magna International is expected to generate 1.3 times less return on investment than Northstar Clean. But when comparing it to its historical volatility, Magna International is 1.77 times less risky than Northstar Clean. It trades about 0.19 of its potential returns per unit of risk. Northstar Clean Technologies is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Northstar Clean Technologies on August 28, 2024 and sell it today you would earn a total of 2.00 from holding Northstar Clean Technologies or generate 11.11% 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. Northstar Clean Technologies
Performance |
| Timeline |
| Magna International |
| Northstar Clean Tech |
Magna International and Northstar Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Northstar Clean
The main advantage of trading using opposite Magna International and Northstar Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Northstar Clean 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 Northstar Clean will offset losses from the drop in Northstar Clean's long position.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| Northstar Clean vs. Republic Services | Northstar Clean vs. Waste Connections | Northstar Clean vs. Clean Harbors | Northstar Clean vs. Gfl Environmental Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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