Correlation Between FARO Technologies and MGIC INVESTMENT
Can any of the company-specific risk be diversified away by investing in both FARO Technologies 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 FARO Technologies and MGIC INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and MGIC INVESTMENT, you can compare the effects of market volatilities on FARO Technologies 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 FARO Technologies with a short position of MGIC INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and MGIC INVESTMENT.
Diversification Opportunities for FARO Technologies and MGIC INVESTMENT
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FARO and MGIC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT and FARO Technologies 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 FARO Technologies 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 FARO Technologies i.e., FARO Technologies and MGIC INVESTMENT go up and down completely randomly.
Pair Corralation between FARO Technologies and MGIC INVESTMENT
Assuming the 90 days horizon FARO Technologies is expected to generate 4.25 times more return on investment than MGIC INVESTMENT. However, FARO Technologies is 4.25 times more volatile than MGIC INVESTMENT. It trades about 0.28 of its potential returns per unit of risk. MGIC INVESTMENT is currently generating about 0.19 per unit of risk. If you would invest 1,610 in FARO Technologies on September 1, 2024 and sell it today you would earn a total of 870.00 from holding FARO Technologies or generate 54.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARO Technologies vs. MGIC INVESTMENT
Performance |
| Timeline |
| FARO Technologies |
| MGIC INVESTMENT |
FARO Technologies and MGIC INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and MGIC INVESTMENT
The main advantage of trading using opposite FARO Technologies and MGIC INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies 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.| FARO Technologies vs. Perseus Mining Limited | FARO Technologies vs. LION ONE METALS | FARO Technologies vs. Western Copper and | FARO Technologies vs. TreeHouse Foods |
| MGIC INVESTMENT vs. Gold Road Resources | MGIC INVESTMENT vs. PT Global Mediacom | MGIC INVESTMENT vs. TITANIUM TRANSPORTGROUP | MGIC INVESTMENT vs. Gaztransport Technigaz SA |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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