Correlation Between SCANSOURCE and MGIC INVESTMENT
Can any of the company-specific risk be diversified away by investing in both SCANSOURCE and MGIC INVESTMENT 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 SCANSOURCE and MGIC INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCANSOURCE and MGIC INVESTMENT, you can compare the effects of market volatilities on SCANSOURCE and MGIC INVESTMENT 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 SCANSOURCE with a short position of MGIC INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCANSOURCE and MGIC INVESTMENT.
Diversification Opportunities for SCANSOURCE and MGIC INVESTMENT
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SCANSOURCE and MGIC is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SCANSOURCE and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT and SCANSOURCE 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 SCANSOURCE are associated (or correlated) with MGIC INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC INVESTMENT has no effect on the direction of SCANSOURCE i.e., SCANSOURCE and MGIC INVESTMENT go up and down completely randomly.
Pair Corralation between SCANSOURCE and MGIC INVESTMENT
Assuming the 90 days trading horizon SCANSOURCE is expected to generate 1.8 times more return on investment than MGIC INVESTMENT. However, SCANSOURCE is 1.8 times more volatile than MGIC INVESTMENT. It trades about 0.14 of its potential returns per unit of risk. MGIC INVESTMENT is currently generating about 0.02 per unit of risk. If you would invest 4,360 in SCANSOURCE on September 13, 2024 and sell it today you would earn a total of 690.00 from holding SCANSOURCE or generate 15.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SCANSOURCE vs. MGIC INVESTMENT
Performance |
| Timeline |
| SCANSOURCE |
| MGIC INVESTMENT |
SCANSOURCE and MGIC INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SCANSOURCE and MGIC INVESTMENT
The main advantage of trading using opposite SCANSOURCE and MGIC INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCANSOURCE position performs unexpectedly, MGIC INVESTMENT 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 MGIC INVESTMENT will offset losses from the drop in MGIC INVESTMENT's long position.The idea behind SCANSOURCE and MGIC INVESTMENT pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| MGIC INVESTMENT vs. Apple Inc | MGIC INVESTMENT vs. Apple Inc | MGIC INVESTMENT vs. Apple Inc | MGIC INVESTMENT vs. Apple Inc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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