Correlation Between MGP Ingredients and Brown Forman
Can any of the company-specific risk be diversified away by investing in both MGP Ingredients and Brown Forman 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 Brown Forman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGP Ingredients and Brown Forman, you can compare the effects of market volatilities on MGP Ingredients and Brown Forman 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 Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGP Ingredients and Brown Forman.
Diversification Opportunities for MGP Ingredients and Brown Forman
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MGP and Brown is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman 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 Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of MGP Ingredients i.e., MGP Ingredients and Brown Forman go up and down completely randomly.
Pair Corralation between MGP Ingredients and Brown Forman
Given the investment horizon of 90 days MGP Ingredients is expected to under-perform the Brown Forman. In addition to that, MGP Ingredients is 1.55 times more volatile than Brown Forman. It trades about -0.06 of its total potential returns per unit of risk. Brown Forman is currently generating about -0.07 per unit of volatility. If you would invest 6,382 in Brown Forman on November 2, 2024 and sell it today you would lose (3,062) from holding Brown Forman or give up 47.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGP Ingredients vs. Brown Forman
Performance |
| Timeline |
| MGP Ingredients |
| Brown Forman |
MGP Ingredients and Brown Forman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGP Ingredients and Brown Forman
The main advantage of trading using opposite MGP Ingredients and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGP Ingredients position performs unexpectedly, Brown Forman 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 Brown Forman will offset losses from the drop in Brown Forman's long position.| MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Diageo PLC ADR | MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Constellation Brands Class |
| Brown Forman vs. Pernod Ricard SA | Brown Forman vs. Willamette Valley Vineyards | Brown Forman vs. MGP Ingredients | Brown Forman vs. Brown Forman |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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