Correlation Between MGP Ingredients and Dow Jones
Can any of the company-specific risk be diversified away by investing in both MGP Ingredients and Dow Jones 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 MGP Ingredients and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGP Ingredients and Dow Jones Industrial, you can compare the effects of market volatilities on MGP Ingredients and Dow Jones 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 MGP Ingredients with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGP Ingredients and Dow Jones.
Diversification Opportunities for MGP Ingredients and Dow Jones
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MGP and Dow is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and MGP Ingredients 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 MGP Ingredients are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of MGP Ingredients i.e., MGP Ingredients and Dow Jones go up and down completely randomly.
Pair Corralation between MGP Ingredients and Dow Jones
Assuming the 90 days trading horizon MGP Ingredients is expected to under-perform the Dow Jones. In addition to that, MGP Ingredients is 4.65 times more volatile than Dow Jones Industrial. It trades about -0.15 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 per unit of volatility. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
MGP Ingredients vs. Dow Jones Industrial
Performance |
| Timeline |
MGP Ingredients and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
MGP Ingredients
Pair trading matchups for MGP Ingredients
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with MGP Ingredients and Dow Jones
The main advantage of trading using opposite MGP Ingredients and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGP Ingredients position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| MGP Ingredients vs. ANDREW PELLER LTD | MGP Ingredients vs. NAKED WINES PLC | MGP Ingredients vs. Superior Plus Corp | MGP Ingredients vs. NMI Holdings |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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