Correlation Between MGIC INVESTMENT and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both MGIC INVESTMENT and Choice Hotels 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 Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGIC INVESTMENT and Choice Hotels International, you can compare the effects of market volatilities on MGIC INVESTMENT and Choice Hotels 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 Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC INVESTMENT and Choice Hotels.
Diversification Opportunities for MGIC INVESTMENT and Choice Hotels
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MGIC and Choice is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MGIC INVESTMENT and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern 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 Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of MGIC INVESTMENT i.e., MGIC INVESTMENT and Choice Hotels go up and down completely randomly.
Pair Corralation between MGIC INVESTMENT and Choice Hotels
Assuming the 90 days trading horizon MGIC INVESTMENT is expected to generate 0.89 times more return on investment than Choice Hotels. However, MGIC INVESTMENT is 1.12 times less risky than Choice Hotels. It trades about 0.27 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.12 per unit of risk. If you would invest 2,300 in MGIC INVESTMENT on November 3, 2024 and sell it today you would earn a total of 180.00 from holding MGIC INVESTMENT or generate 7.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGIC INVESTMENT vs. Choice Hotels International
Performance |
| Timeline |
| MGIC INVESTMENT |
| Choice Hotels Intern |
MGIC INVESTMENT and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGIC INVESTMENT and Choice Hotels
The main advantage of trading using opposite MGIC INVESTMENT and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGIC INVESTMENT position performs unexpectedly, Choice Hotels 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.| MGIC INVESTMENT vs. Reinsurance Group of | MGIC INVESTMENT vs. SIDETRADE EO 1 | MGIC INVESTMENT vs. Zurich Insurance Group | MGIC INVESTMENT vs. Salesforce |
| Choice Hotels vs. QBE Insurance Group | Choice Hotels vs. Granite Construction | Choice Hotels vs. Federal Agricultural Mortgage | Choice Hotels vs. WIMFARM SA EO |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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