Correlation Between MGIC Investment and Radian

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Can any of the company-specific risk be diversified away by investing in both MGIC Investment and Radian 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 MGIC Investment and Radian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGIC Investment and Radian Group, you can compare the effects of market volatilities on MGIC Investment and Radian 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 MGIC Investment with a short position of Radian. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC Investment and Radian.

Diversification Opportunities for MGIC Investment and Radian

MGICRadianDiversified AwayMGICRadianDiversified Away100%
0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between MGIC and Radian is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment and Radian Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radian Group and MGIC Investment 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 MGIC Investment are associated (or correlated) with Radian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radian Group has no effect on the direction of MGIC Investment i.e., MGIC Investment and Radian go up and down completely randomly.

Pair Corralation between MGIC Investment and Radian

Assuming the 90 days horizon MGIC Investment is expected to under-perform the Radian. In addition to that, MGIC Investment is 1.16 times more volatile than Radian Group. It trades about -0.16 of its total potential returns per unit of risk. Radian Group is currently generating about -0.14 per unit of volatility. If you would invest  3,195  in Radian Group on November 30, 2024 and sell it today you would lose (135.00) from holding Radian Group or give up 4.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

MGIC Investment  vs.  Radian Group

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -4-202468
JavaScript chart by amCharts 3.21.15MGC RAG
       Timeline  
MGIC Investment 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days MGIC Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb22.52323.52424.5
Radian Group 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Radian Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb29.53030.53131.53232.533

MGIC Investment and Radian Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.72-2.03-1.35-0.67-0.01060.631.271.92.54 0.050.100.150.20
JavaScript chart by amCharts 3.21.15MGC RAG
       Returns  

Pair Trading with MGIC Investment and Radian

The main advantage of trading using opposite MGIC Investment and Radian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGIC Investment position performs unexpectedly, Radian 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 Radian will offset losses from the drop in Radian's long position.
The idea behind MGIC Investment and Radian Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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