Correlation Between Ferrari NV and Magna International
Can any of the company-specific risk be diversified away by investing in both Ferrari NV 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 Ferrari NV and Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferrari NV and Magna International, you can compare the effects of market volatilities on Ferrari NV 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 Ferrari NV with a short position of Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrari NV and Magna International.
Diversification Opportunities for Ferrari NV and Magna International
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ferrari and Magna is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Ferrari NV 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 Ferrari NV 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 Ferrari NV i.e., Ferrari NV and Magna International go up and down completely randomly.
Pair Corralation between Ferrari NV and Magna International
Given the investment horizon of 90 days Ferrari NV is expected to generate 0.67 times more return on investment than Magna International. However, Ferrari NV is 1.5 times less risky than Magna International. It trades about 0.12 of its potential returns per unit of risk. Magna International is currently generating about -0.1 per unit of risk. If you would invest 41,742 in Ferrari NV on November 4, 2024 and sell it today you would earn a total of 1,110 from holding Ferrari NV or generate 2.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferrari NV vs. Magna International
Performance |
| Timeline |
| Ferrari NV |
| Magna International |
Ferrari NV and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferrari NV and Magna International
The main advantage of trading using opposite Ferrari NV and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrari NV 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.| Ferrari NV vs. Volkswagen AG Pref | Ferrari NV vs. Volkswagen AG 110 | Ferrari NV vs. Porsche Automobil Holding | Ferrari NV vs. Toyota Motor |
| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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