Correlation Between PEPTONIC MEDICAL and MGP Ingredients

Can any of the company-specific risk be diversified away by investing in both PEPTONIC MEDICAL and MGP Ingredients 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 PEPTONIC MEDICAL and MGP Ingredients into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PEPTONIC MEDICAL and MGP Ingredients, you can compare the effects of market volatilities on PEPTONIC MEDICAL and MGP Ingredients 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 PEPTONIC MEDICAL with a short position of MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of PEPTONIC MEDICAL and MGP Ingredients.

Diversification Opportunities for PEPTONIC MEDICAL and MGP Ingredients

0.0

Correlation Coefficient

PEPTONIC MEDICAL  MGP Ingredients

Pay attention - limited upside

The 3 months correlation between PEPTONIC and MGP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PEPTONIC MEDICAL and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients and PEPTONIC MEDICAL 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 PEPTONIC MEDICAL are associated (or correlated) with MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of PEPTONIC MEDICAL i.e., PEPTONIC MEDICAL and MGP Ingredients go up and down completely randomly.

Pair Corralation between PEPTONIC MEDICAL and MGP Ingredients

Assuming the 90 days horizon PEPTONIC MEDICAL is expected to generate 24.29 times more return on investment than MGP Ingredients. However, PEPTONIC MEDICAL is 24.29 times more volatile than MGP Ingredients. It trades about 0.07 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.06 per unit of risk. If you would invest  0.19  in PEPTONIC MEDICAL on October 10, 2024 and sell it today you would lose (0.17) from holding PEPTONIC MEDICAL or give up 89.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PEPTONIC MEDICAL  vs.  MGP Ingredients

PEPTONIC MEDICAL

Risk-Adjusted Performance

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Very Weak

Over the last 90 days PEPTONIC MEDICAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PEPTONIC MEDICAL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MGP Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGP Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PEPTONIC MEDICAL and MGP Ingredients

The main advantage of trading using opposite PEPTONIC MEDICAL and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PEPTONIC MEDICAL position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.

The idea behind PEPTONIC MEDICAL and MGP Ingredients 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.