Correlation Between Employers Holdings and MGIC Investment
Can any of the company-specific risk be diversified away by investing in both Employers Holdings 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 Employers Holdings and MGIC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Employers Holdings and MGIC Investment Corp, you can compare the effects of market volatilities on Employers Holdings 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 Employers Holdings with a short position of MGIC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Employers Holdings and MGIC Investment.
Diversification Opportunities for Employers Holdings and MGIC Investment
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Employers and MGIC is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings 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 Employers Holdings 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 Employers Holdings 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 Employers Holdings i.e., Employers Holdings and MGIC Investment go up and down completely randomly.
Pair Corralation between Employers Holdings and MGIC Investment
Considering the 90-day investment horizon Employers Holdings is expected to generate 1.24 times more return on investment than MGIC Investment. However, Employers Holdings is 1.24 times more volatile than MGIC Investment Corp. It trades about 0.21 of its potential returns per unit of risk. MGIC Investment Corp is currently generating about -0.02 per unit of risk. If you would invest 4,775 in Employers Holdings on August 24, 2024 and sell it today you would earn a total of 504.00 from holding Employers Holdings or generate 10.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Employers Holdings vs. MGIC Investment Corp
Performance |
| Timeline |
| Employers Holdings |
| MGIC Investment Corp |
Employers Holdings and MGIC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Employers Holdings and MGIC Investment
The main advantage of trading using opposite Employers Holdings and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Employers Holdings 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.| Employers Holdings vs. ICC Holdings | Employers Holdings vs. AMERISAFE | Employers Holdings vs. NMI Holdings | Employers Holdings vs. Investors Title |
| MGIC Investment vs. MBIA Inc | MGIC Investment vs. NMI Holdings | MGIC Investment vs. Employers Holdings | MGIC Investment vs. James River Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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