Correlation Between Chubb and MGIC Investment

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

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

Diversification Opportunities for Chubb and MGIC Investment

-0.32

Correlation Coefficient

Chubb  MGIC Investment

Very good diversification

The 3 months correlation between Chubb and MGIC is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and MGIC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC Investment Corp and Chubb 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 Chubb 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 Corp has no effect on the direction of Chubb i.e., Chubb and MGIC Investment go up and down completely randomly.

Pair Corralation between Chubb and MGIC Investment

Allowing for the 90-day total investment horizon Chubb is expected to generate 0.97 times more return on investment than MGIC Investment. However, Chubb is 1.03 times less risky than MGIC Investment. It trades about 0.08 of its potential returns per unit of risk. MGIC Investment Corp is currently generating about 0.05 per unit of risk. If you would invest  27,739  in Chubb on December 26, 2024 and sell it today you would earn a total of  1,793  from holding Chubb or generate 6.46% return on investment over 90 days.

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

Chubb  vs.  MGIC Investment Corp

Chubb

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Chubb may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MGIC Investment Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MGIC Investment Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MGIC Investment is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chubb and MGIC Investment

The main advantage of trading using opposite Chubb and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chubb 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 Chubb and MGIC Investment Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.