Correlation Between Lakeside Holding and MGIC Investment

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

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

Diversification Opportunities for Lakeside Holding and MGIC Investment

-0.08

Correlation Coefficient

Lakeside Holding  MGIC Investment

Good diversification

The 3 months correlation between Lakeside and MGIC is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lakeside Holding Limited 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 Lakeside Holding 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 Lakeside Holding Limited 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 Lakeside Holding i.e., Lakeside Holding and MGIC Investment go up and down completely randomly.

Pair Corralation between Lakeside Holding and MGIC Investment

Considering the 90-day investment horizon Lakeside Holding Limited is expected to under-perform the MGIC Investment. In addition to that, Lakeside Holding is 3.99 times more volatile than MGIC Investment Corp. It trades about -0.06 of its total potential returns per unit of risk. MGIC Investment Corp is currently generating about -0.05 per unit of volatility. If you would invest  2,579  in MGIC Investment Corp on December 3, 2024 and sell it today you would lose (122.00) from holding MGIC Investment Corp or give up 4.73% of portfolio value over 90 days.

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

Lakeside Holding Limited  vs.  MGIC Investment Corp

Lakeside Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lakeside Holding Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

MGIC Investment Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days MGIC Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Lakeside Holding and MGIC Investment

The main advantage of trading using opposite Lakeside Holding and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lakeside Holding 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 Lakeside Holding Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.