Correlation Between Magna International and Lear
Can any of the company-specific risk be diversified away by investing in both Magna International and Lear 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 Magna International and Lear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Lear Corporation, you can compare the effects of market volatilities on Magna International and Lear 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 Magna International with a short position of Lear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Lear.
Diversification Opportunities for Magna International and Lear
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Magna and Lear is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear and Magna International 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 Magna International are associated (or correlated) with Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Magna International i.e., Magna International and Lear go up and down completely randomly.
Pair Corralation between Magna International and Lear
Considering the 90-day investment horizon Magna International is expected to under-perform the Lear. In addition to that, Magna International is 1.02 times more volatile than Lear Corporation. It trades about -0.25 of its total potential returns per unit of risk. Lear Corporation is currently generating about -0.14 per unit of volatility. If you would invest 14,166 in Lear Corporation on January 26, 2024 and sell it today you would lose (649.00) from holding Lear Corporation or give up 4.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Lear Corp.
Performance |
| Timeline |
| Magna International |
| Lear |
Magna International and Lear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Lear
The main advantage of trading using opposite Magna International and Lear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International position performs unexpectedly, Lear 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 Lear will offset losses from the drop in Lear's long position.| Magna International vs. Faraday Future Intelligent | Magna International vs. Mullen Automotive | Magna International vs. Xpeng Inc | Magna International vs. Nio Class A |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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