Correlation Between Black Hills and MGIC Investment
Can any of the company-specific risk be diversified away by investing in both Black Hills 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 Black Hills and MGIC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Hills and MGIC Investment Corp, you can compare the effects of market volatilities on Black Hills 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 Black Hills with a short position of MGIC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Hills and MGIC Investment.
Diversification Opportunities for Black Hills and MGIC Investment
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Black and MGIC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills 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 Black Hills 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 Black Hills 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 Black Hills i.e., Black Hills and MGIC Investment go up and down completely randomly.
Pair Corralation between Black Hills and MGIC Investment
Considering the 90-day investment horizon Black Hills is expected to generate 0.72 times more return on investment than MGIC Investment. However, Black Hills is 1.38 times less risky than MGIC Investment. It trades about 0.27 of its potential returns per unit of risk. MGIC Investment Corp is currently generating about 0.13 per unit of risk. If you would invest 5,972 in Black Hills on August 28, 2024 and sell it today you would earn a total of 494.00 from holding Black Hills or generate 8.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Hills vs. MGIC Investment Corp
Performance |
| Timeline |
| Black Hills |
| MGIC Investment Corp |
Black Hills and MGIC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Hills and MGIC Investment
The main advantage of trading using opposite Black Hills and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills 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.| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
| MGIC Investment vs. MBIA Inc | MGIC Investment vs. NMI Holdings | MGIC Investment vs. Assured Guaranty | MGIC Investment vs. Employers Holdings |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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