Correlation Between Exco Technologies and Magna International

Can any of the company-specific risk be diversified away by investing in both Exco Technologies 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 Exco Technologies and Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Exco Technologies Limited and Magna International, you can compare the effects of market volatilities on Exco Technologies 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 Exco Technologies with a short position of Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exco Technologies and Magna International.

Diversification Opportunities for Exco Technologies and Magna International

0.71

Correlation Coefficient

Exco Technologies  Magna International

Poor diversification

The 3 months correlation between Exco and Magna is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Exco Technologies Limited and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Exco Technologies 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 Exco Technologies Limited 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 Exco Technologies i.e., Exco Technologies and Magna International go up and down completely randomly.

Pair Corralation between Exco Technologies and Magna International

Assuming the 90 days trading horizon Exco Technologies is expected to generate 1.25 times less return on investment than Magna International. But when comparing it to its historical volatility, Exco Technologies Limited is 1.1 times less risky than Magna International. It trades about 0.16 of its potential returns per unit of risk. Magna International is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,675  in Magna International on April 24, 2025 and sell it today you would earn a total of  1,045  from holding Magna International or generate 22.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Exco Technologies Limited  vs.  Magna International

Exco Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exco Technologies Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Exco Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Magna International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Magna International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exco Technologies and Magna International

The main advantage of trading using opposite Exco Technologies and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exco Technologies 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 Exco Technologies Limited 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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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.