Correlation Between MGP Ingredients and LQR House
Can any of the company-specific risk be diversified away by investing in both MGP Ingredients and LQR House 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 LQR House into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGP Ingredients and LQR House Common, you can compare the effects of market volatilities on MGP Ingredients and LQR House 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 LQR House. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGP Ingredients and LQR House.
Diversification Opportunities for MGP Ingredients and LQR House
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MGP and LQR is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and LQR House Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LQR House Common 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 LQR House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LQR House Common has no effect on the direction of MGP Ingredients i.e., MGP Ingredients and LQR House go up and down completely randomly.
Pair Corralation between MGP Ingredients and LQR House
Given the investment horizon of 90 days MGP Ingredients is expected to under-perform the LQR House. But the stock apears to be less risky and, when comparing its historical volatility, MGP Ingredients is 2.36 times less risky than LQR House. The stock trades about -0.25 of its potential returns per unit of risk. The LQR House Common is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 62.00 in LQR House Common on August 25, 2024 and sell it today you would earn a total of 57.00 from holding LQR House Common or generate 91.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGP Ingredients vs. LQR House Common
Performance |
| Timeline |
| MGP Ingredients |
| LQR House Common |
MGP Ingredients and LQR House Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGP Ingredients and LQR House
The main advantage of trading using opposite MGP Ingredients and LQR House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGP Ingredients position performs unexpectedly, LQR House 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 LQR House will offset losses from the drop in LQR House'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 |
| LQR House vs. Emerson Radio | LQR House vs. Flexible Solutions International | LQR House vs. Summit Materials | LQR House vs. Cementos Pacasmayo SAA |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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