Correlation Between Douglas Dynamics and Magna International
Can any of the company-specific risk be diversified away by investing in both Douglas Dynamics and Magna International 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 Douglas Dynamics and Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Douglas Dynamics and Magna International, you can compare the effects of market volatilities on Douglas Dynamics and Magna International 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 Douglas Dynamics with a short position of Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Dynamics and Magna International.
Diversification Opportunities for Douglas Dynamics and Magna International
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Douglas and Magna is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Dynamics and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Douglas Dynamics 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 Douglas Dynamics are associated (or correlated) with Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Douglas Dynamics i.e., Douglas Dynamics and Magna International go up and down completely randomly.
Pair Corralation between Douglas Dynamics and Magna International
Given the investment horizon of 90 days Douglas Dynamics is expected to generate 0.91 times more return on investment than Magna International. However, Douglas Dynamics is 1.1 times less risky than Magna International. It trades about 0.23 of its potential returns per unit of risk. Magna International is currently generating about 0.17 per unit of risk. If you would invest 2,297 in Douglas Dynamics on August 30, 2024 and sell it today you would earn a total of 267.00 from holding Douglas Dynamics or generate 11.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Douglas Dynamics vs. Magna International
Performance |
| Timeline |
| Douglas Dynamics |
| Magna International |
Douglas Dynamics and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Douglas Dynamics and Magna International
The main advantage of trading using opposite Douglas Dynamics and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Dynamics position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| Douglas Dynamics vs. Monro Muffler Brake | Douglas Dynamics vs. Motorcar Parts of | Douglas Dynamics vs. Standard Motor Products | Douglas Dynamics vs. Stoneridge |
| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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