Correlation Between GOODYEAR T and MGIC INVESTMENT
Can any of the company-specific risk be diversified away by investing in both GOODYEAR T 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 GOODYEAR T and MGIC INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GOODYEAR T RUBBER and MGIC INVESTMENT, you can compare the effects of market volatilities on GOODYEAR T 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 GOODYEAR T with a short position of MGIC INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOODYEAR T and MGIC INVESTMENT.
Diversification Opportunities for GOODYEAR T and MGIC INVESTMENT
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GOODYEAR and MGIC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT and GOODYEAR T 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 GOODYEAR T RUBBER 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 GOODYEAR T i.e., GOODYEAR T and MGIC INVESTMENT go up and down completely randomly.
Pair Corralation between GOODYEAR T and MGIC INVESTMENT
Assuming the 90 days trading horizon GOODYEAR T RUBBER is expected to under-perform the MGIC INVESTMENT. In addition to that, GOODYEAR T is 2.49 times more volatile than MGIC INVESTMENT. It trades about -0.01 of its total potential returns per unit of risk. MGIC INVESTMENT is currently generating about 0.17 per unit of volatility. If you would invest 1,927 in MGIC INVESTMENT on September 3, 2024 and sell it today you would earn a total of 553.00 from holding MGIC INVESTMENT or generate 28.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GOODYEAR T RUBBER vs. MGIC INVESTMENT
Performance |
| Timeline |
| GOODYEAR T RUBBER |
| MGIC INVESTMENT |
GOODYEAR T and MGIC INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOODYEAR T and MGIC INVESTMENT
The main advantage of trading using opposite GOODYEAR T and MGIC INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T 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.| GOODYEAR T vs. TOTAL GABON | GOODYEAR T vs. Walgreens Boots Alliance | GOODYEAR T vs. Peak Resources Limited |
| MGIC INVESTMENT vs. TOTAL GABON | MGIC INVESTMENT vs. Walgreens Boots Alliance | MGIC INVESTMENT vs. Peak Resources 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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