Correlation Between MGIC Investment and Magna International
Can any of the company-specific risk be diversified away by investing in both MGIC Investment and Magna International 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 Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGIC Investment Corp and Magna International, you can compare the effects of market volatilities on MGIC Investment and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC Investment and Magna International.
Diversification Opportunities for MGIC Investment and Magna International
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MGIC and Magna is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Corp are associated (or correlated) with Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of MGIC Investment i.e., MGIC Investment and Magna International go up and down completely randomly.
Pair Corralation between MGIC Investment and Magna International
Considering the 90-day investment horizon MGIC Investment is expected to generate 2.16 times less return on investment than Magna International. But when comparing it to its historical volatility, MGIC Investment Corp is 1.28 times less risky than Magna International. It trades about 0.07 of its potential returns per unit of risk. Magna International is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,227 in Magna International on August 28, 2024 and sell it today you would earn a total of 419.00 from holding Magna International or generate 9.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGIC Investment Corp vs. Magna International
Performance |
| Timeline |
| MGIC Investment Corp |
| Magna International |
MGIC Investment and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGIC Investment and Magna International
The main advantage of trading using opposite MGIC Investment and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGIC Investment position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| MGIC Investment vs. MBIA Inc | MGIC Investment vs. NMI Holdings | MGIC Investment vs. Assured Guaranty | MGIC Investment vs. Employers Holdings |
| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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