Correlation Between China BlueChemical and MGIC INVESTMENT

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

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

Diversification Opportunities for China BlueChemical and MGIC INVESTMENT

0.12

Correlation Coefficient

China BlueChemical  MGIC INVESTMENT

Average diversification

The 3 months correlation between China and MGIC is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT and China BlueChemical 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 China BlueChemical 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 China BlueChemical i.e., China BlueChemical and MGIC INVESTMENT go up and down completely randomly.

Pair Corralation between China BlueChemical and MGIC INVESTMENT

Assuming the 90 days horizon China BlueChemical is expected to generate 2.49 times more return on investment than MGIC INVESTMENT. However, China BlueChemical is 2.49 times more volatile than MGIC INVESTMENT. It trades about 0.23 of its potential returns per unit of risk. MGIC INVESTMENT is currently generating about -0.3 per unit of risk. If you would invest  23.00  in China BlueChemical on October 5, 2024 and sell it today you would earn a total of  3.00  from holding China BlueChemical or generate 13.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

China BlueChemical  vs.  MGIC INVESTMENT

China BlueChemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

MGIC INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGIC INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, MGIC INVESTMENT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with China BlueChemical and MGIC INVESTMENT

The main advantage of trading using opposite China BlueChemical and MGIC INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China BlueChemical 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 China BlueChemical 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.