Correlation Between Continental Aktiengesellscha and Magna International
Can any of the company-specific risk be diversified away by investing in both Continental Aktiengesellscha 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 Continental Aktiengesellscha and Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Continental Aktiengesellschaft and Magna International, you can compare the effects of market volatilities on Continental Aktiengesellscha 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 Continental Aktiengesellscha with a short position of Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental Aktiengesellscha and Magna International.
Diversification Opportunities for Continental Aktiengesellscha and Magna International
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Continental and Magna is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Continental Aktiengesellschaft and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Continental Aktiengesellscha 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 Continental Aktiengesellschaft 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 Continental Aktiengesellscha i.e., Continental Aktiengesellscha and Magna International go up and down completely randomly.
Pair Corralation between Continental Aktiengesellscha and Magna International
Assuming the 90 days trading horizon Continental Aktiengesellschaft is expected to under-perform the Magna International. But the stock apears to be less risky and, when comparing its historical volatility, Continental Aktiengesellschaft is 1.05 times less risky than Magna International. The stock trades about -0.07 of its potential returns per unit of risk. The Magna International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,180 in Magna International on April 3, 2025 and sell it today you would earn a total of 82.00 from holding Magna International or generate 2.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.65% |
Values | Daily Returns |
Continental Aktiengesellschaft vs. Magna International
Performance |
Timeline |
Continental Aktiengesellscha |
Magna International |
Continental Aktiengesellscha and Magna International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Continental Aktiengesellscha and Magna International
The main advantage of trading using opposite Continental Aktiengesellscha and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental Aktiengesellscha 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.The idea behind Continental Aktiengesellschaft and Magna International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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