Correlation Between LODESTAR MIN and MGP Ingredients

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

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

Diversification Opportunities for LODESTAR MIN and MGP Ingredients

-0.6

Correlation Coefficient

LODESTAR MIN  MGP Ingredients

Excellent diversification

The 3 months correlation between LODESTAR and MGP is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding LODESTAR MIN and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients and LODESTAR MIN 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 LODESTAR MIN 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 LODESTAR MIN i.e., LODESTAR MIN and MGP Ingredients go up and down completely randomly.

Pair Corralation between LODESTAR MIN and MGP Ingredients

Assuming the 90 days trading horizon LODESTAR MIN is expected to generate 17.82 times more return on investment than MGP Ingredients. However, LODESTAR MIN is 17.82 times more volatile than MGP Ingredients. It trades about 0.04 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.06 per unit of risk. If you would invest  0.69  in LODESTAR MIN on October 4, 2024 and sell it today you would earn a total of  8.08  from holding LODESTAR MIN or generate 1171.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

LODESTAR MIN  vs.  MGP Ingredients

LODESTAR MIN

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LODESTAR MIN are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward-looking indicators, LODESTAR MIN exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain 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 LODESTAR MIN and MGP Ingredients

The main advantage of trading using opposite LODESTAR MIN and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LODESTAR MIN 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 LODESTAR MIN 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.