Correlation Between Restaurant Brands and Magna International
Can any of the company-specific risk be diversified away by investing in both Restaurant Brands 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 Restaurant Brands and Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Restaurant Brands International and Magna International, you can compare the effects of market volatilities on Restaurant Brands 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 Restaurant Brands with a short position of Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Magna International.
Diversification Opportunities for Restaurant Brands and Magna International
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Restaurant and Magna is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Restaurant Brands 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 Restaurant Brands International 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 Restaurant Brands i.e., Restaurant Brands and Magna International go up and down completely randomly.
Pair Corralation between Restaurant Brands and Magna International
Assuming the 90 days trading horizon Restaurant Brands International is expected to generate 0.62 times more return on investment than Magna International. However, Restaurant Brands International is 1.62 times less risky than Magna International. It trades about 0.03 of its potential returns per unit of risk. Magna International is currently generating about 0.0 per unit of risk. If you would invest 8,585 in Restaurant Brands International on August 28, 2024 and sell it today you would earn a total of 1,174 from holding Restaurant Brands International or generate 13.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Restaurant Brands Internationa vs. Magna International
Performance |
| Timeline |
| Restaurant Brands |
| Magna International |
Restaurant Brands and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Restaurant Brands and Magna International
The main advantage of trading using opposite Restaurant Brands and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands 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.| Restaurant Brands vs. Apple Inc CDR | Restaurant Brands vs. Berkshire Hathaway CDR | Restaurant Brands vs. Microsoft Corp CDR | Restaurant Brands vs. Alphabet Inc CDR |
| Magna International vs. Canadian National Railway | Magna International vs. Nutrien | Magna International vs. Restaurant Brands International | Magna International vs. Canadian Pacific Railway |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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