Correlation Between Ford and MGIC Investment
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and MGIC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and MGIC Investment, you can compare the effects of market volatilities on Ford 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 Ford with a short position of MGIC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and MGIC Investment.
Diversification Opportunities for Ford and MGIC Investment
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and MGIC is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and MGIC Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC Investment and Ford 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 Ford Motor 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 Ford i.e., Ford and MGIC Investment go up and down completely randomly.
Pair Corralation between Ford and MGIC Investment
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.2 times more return on investment than MGIC Investment. However, Ford is 1.2 times more volatile than MGIC Investment. It trades about 0.05 of its potential returns per unit of risk. MGIC Investment is currently generating about -0.04 per unit of risk. If you would invest 975.00 in Ford Motor on December 25, 2024 and sell it today you would earn a total of 50.00 from holding Ford Motor or generate 5.13% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.33% |
Values | Daily Returns |
Ford Motor vs. MGIC Investment
Performance |
Timeline |
Ford Motor |
MGIC Investment |
Ford and MGIC Investment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and MGIC Investment
The main advantage of trading using opposite Ford and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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. Caseys General Stores | MGIC Investment vs. ecotel communication ag | MGIC Investment vs. G III Apparel Group | MGIC Investment vs. Cairo Communication SpA |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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