Correlation Between DATAGROUP and MGP Ingredients

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

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

Diversification Opportunities for DATAGROUP and MGP Ingredients

-0.29

Correlation Coefficient

DATAGROUP  MGP Ingredients

Very good diversification

The 3 months correlation between DATAGROUP and MGP is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding DATAGROUP SE and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients and DATAGROUP 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 DATAGROUP SE 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 DATAGROUP i.e., DATAGROUP and MGP Ingredients go up and down completely randomly.

Pair Corralation between DATAGROUP and MGP Ingredients

Assuming the 90 days trading horizon DATAGROUP SE is expected to generate 0.83 times more return on investment than MGP Ingredients. However, DATAGROUP SE is 1.21 times less risky than MGP Ingredients. It trades about -0.02 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.06 per unit of risk. If you would invest  6,340  in DATAGROUP SE on October 5, 2024 and sell it today you would lose (1,660) from holding DATAGROUP SE or give up 26.18% of portfolio value over 90 days.

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

DATAGROUP SE  vs.  MGP Ingredients

DATAGROUP SE

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days DATAGROUP SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile technical indicators, DATAGROUP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 unsteady 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 DATAGROUP and MGP Ingredients

The main advantage of trading using opposite DATAGROUP and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATAGROUP 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 DATAGROUP SE 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.