Correlation Between Automatic Data and MGIC INVESTMENT
Can any of the company-specific risk be diversified away by investing in both Automatic Data and MGIC INVESTMENT 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 Automatic Data and MGIC INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automatic Data Processing and MGIC INVESTMENT, you can compare the effects of market volatilities on Automatic Data and MGIC INVESTMENT 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 Automatic Data with a short position of MGIC INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and MGIC INVESTMENT.
Diversification Opportunities for Automatic Data and MGIC INVESTMENT
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Automatic and MGIC is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT and Automatic Data 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 Automatic Data Processing are associated (or correlated) with MGIC INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC INVESTMENT has no effect on the direction of Automatic Data i.e., Automatic Data and MGIC INVESTMENT go up and down completely randomly.
Pair Corralation between Automatic Data and MGIC INVESTMENT
Assuming the 90 days horizon Automatic Data is expected to generate 1.79 times less return on investment than MGIC INVESTMENT. In addition to that, Automatic Data is 1.03 times more volatile than MGIC INVESTMENT. It trades about 0.07 of its total potential returns per unit of risk. MGIC INVESTMENT is currently generating about 0.13 per unit of volatility. If you would invest 1,232 in MGIC INVESTMENT on September 1, 2024 and sell it today you would earn a total of 1,248 from holding MGIC INVESTMENT or generate 101.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automatic Data Processing vs. MGIC INVESTMENT
Performance |
| Timeline |
| Automatic Data Processing |
| MGIC INVESTMENT |
Automatic Data and MGIC INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automatic Data and MGIC INVESTMENT
The main advantage of trading using opposite Automatic Data and MGIC INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data position performs unexpectedly, MGIC INVESTMENT 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 MGIC INVESTMENT will offset losses from the drop in MGIC INVESTMENT's long position.| Automatic Data vs. Global Ship Lease | Automatic Data vs. BOSTON BEER A | Automatic Data vs. National Beverage Corp | Automatic Data vs. Digilife Technologies Limited |
| MGIC INVESTMENT vs. Gold Road Resources | MGIC INVESTMENT vs. PT Global Mediacom | MGIC INVESTMENT vs. TITANIUM TRANSPORTGROUP | MGIC INVESTMENT vs. Gaztransport Technigaz SA |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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