Correlation Between First American and MGIC Investment
Can any of the company-specific risk be diversified away by investing in both First American 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 First American and MGIC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American and MGIC Investment Corp, you can compare the effects of market volatilities on First American 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 First American with a short position of MGIC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and MGIC Investment.
Diversification Opportunities for First American and MGIC Investment
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and MGIC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First American 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 First American 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 First American 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 First American i.e., First American and MGIC Investment go up and down completely randomly.
Pair Corralation between First American and MGIC Investment
Considering the 90-day investment horizon First American is expected to generate 5.42 times less return on investment than MGIC Investment. In addition to that, First American is 1.27 times more volatile than MGIC Investment Corp. It trades about 0.03 of its total potential returns per unit of risk. MGIC Investment Corp is currently generating about 0.2 per unit of volatility. If you would invest 2,332 in MGIC Investment Corp on October 20, 2024 and sell it today you would earn a total of 114.00 from holding MGIC Investment Corp or generate 4.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First American vs. MGIC Investment Corp
Performance |
| Timeline |
| First American |
| MGIC Investment Corp |
First American and MGIC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First American and MGIC Investment
The main advantage of trading using opposite First American and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American 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.| First American vs. Fidelity National Financial | First American vs. Stewart Information Services | First American vs. Old Republic International | First American 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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