Correlation Between Assured Guaranty and MGIC Investment
Can any of the company-specific risk be diversified away by investing in both Assured Guaranty 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 Assured Guaranty and MGIC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Assured Guaranty and MGIC Investment Corp, you can compare the effects of market volatilities on Assured Guaranty 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 Assured Guaranty with a short position of MGIC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Assured Guaranty and MGIC Investment.
Diversification Opportunities for Assured Guaranty and MGIC Investment
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Assured and MGIC is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Assured Guaranty and MGIC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC Investment Corp and Assured Guaranty 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 Assured Guaranty 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 Corp has no effect on the direction of Assured Guaranty i.e., Assured Guaranty and MGIC Investment go up and down completely randomly.
Pair Corralation between Assured Guaranty and MGIC Investment
Considering the 90-day investment horizon Assured Guaranty is expected to generate 1.39 times less return on investment than MGIC Investment. But when comparing it to its historical volatility, Assured Guaranty is 1.16 times less risky than MGIC Investment. It trades about 0.25 of its potential returns per unit of risk. MGIC Investment Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,371 in MGIC Investment Corp on November 1, 2024 and sell it today you would earn a total of 202.50 from holding MGIC Investment Corp or generate 8.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Assured Guaranty vs. MGIC Investment Corp
Performance |
| Timeline |
| Assured Guaranty |
| MGIC Investment Corp |
Assured Guaranty and MGIC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Assured Guaranty and MGIC Investment
The main advantage of trading using opposite Assured Guaranty and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Assured Guaranty 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.| Assured Guaranty vs. AXIS Capital Holdings | Assured Guaranty vs. MBIA Inc | Assured Guaranty vs. Assurant | Assured Guaranty vs. American Financial Group |
| MGIC Investment vs. MBIA Inc | MGIC Investment vs. NMI Holdings | MGIC Investment vs. Essent Group | MGIC Investment vs. Assured Guaranty |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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