Correlation Between China Communications and MGIC INVESTMENT
Can any of the company-specific risk be diversified away by investing in both China Communications 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 China Communications and MGIC INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Communications Services and MGIC INVESTMENT, you can compare the effects of market volatilities on China Communications 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 China Communications with a short position of MGIC INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and MGIC INVESTMENT.
Diversification Opportunities for China Communications and MGIC INVESTMENT
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and MGIC is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT and China Communications 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 China Communications Services 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 China Communications i.e., China Communications and MGIC INVESTMENT go up and down completely randomly.
Pair Corralation between China Communications and MGIC INVESTMENT
Assuming the 90 days horizon China Communications Services is expected to generate 1.12 times more return on investment than MGIC INVESTMENT. However, China Communications is 1.12 times more volatile than MGIC INVESTMENT. It trades about 0.38 of its potential returns per unit of risk. MGIC INVESTMENT is currently generating about -0.31 per unit of risk. If you would invest 49.00 in China Communications Services on October 1, 2024 and sell it today you would earn a total of 5.00 from holding China Communications Services or generate 10.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. MGIC INVESTMENT
Performance |
| Timeline |
| China Communications |
| MGIC INVESTMENT |
China Communications and MGIC INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and MGIC INVESTMENT
The main advantage of trading using opposite China Communications and MGIC INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications 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.| China Communications vs. Lifeway Foods | China Communications vs. TreeHouse Foods | China Communications vs. Evolution Mining Limited | China Communications vs. Perseus Mining Limited |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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