Correlation Between MGIC Investment and CREF Inflation
Can any of the company-specific risk be diversified away by investing in both MGIC Investment and CREF Inflation 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 CREF Inflation 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 CREF Inflation Linked Bond, you can compare the effects of market volatilities on MGIC Investment and CREF Inflation 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 CREF Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC Investment and CREF Inflation.
Diversification Opportunities for MGIC Investment and CREF Inflation
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MGIC and CREF is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and CREF Inflation Linked Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CREF Inflation Linked 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 CREF Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CREF Inflation Linked has no effect on the direction of MGIC Investment i.e., MGIC Investment and CREF Inflation go up and down completely randomly.
Pair Corralation between MGIC Investment and CREF Inflation
Considering the 90-day investment horizon MGIC Investment Corp is expected to generate 5.5 times more return on investment than CREF Inflation. However, MGIC Investment is 5.5 times more volatile than CREF Inflation Linked Bond. It trades about 0.11 of its potential returns per unit of risk. CREF Inflation Linked Bond is currently generating about 0.07 per unit of risk. If you would invest 1,232 in MGIC Investment Corp on September 14, 2024 and sell it today you would earn a total of 1,231 from holding MGIC Investment Corp or generate 99.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.99% |
| Values | Daily Returns |
MGIC Investment Corp vs. CREF Inflation Linked Bond
Performance |
| Timeline |
| MGIC Investment Corp |
| CREF Inflation Linked |
MGIC Investment and CREF Inflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGIC Investment and CREF Inflation
The main advantage of trading using opposite MGIC Investment and CREF Inflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGIC Investment position performs unexpectedly, CREF Inflation 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 CREF Inflation will offset losses from the drop in CREF Inflation's long position.| MGIC Investment vs. MBIA Inc | MGIC Investment vs. NMI Holdings | MGIC Investment vs. Essent Group | MGIC Investment vs. Assured Guaranty |
| CREF Inflation vs. Park Ohio Holdings | CREF Inflation vs. Parker Hannifin | CREF Inflation vs. MGIC Investment Corp | CREF Inflation vs. Western Asset Investment |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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