Correlation Between FIREWEED METALS and MGP Ingredients

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

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

Diversification Opportunities for FIREWEED METALS and MGP Ingredients

-0.46

Correlation Coefficient

FIREWEED METALS  MGP Ingredients

Very good diversification

The 3 months correlation between FIREWEED and MGP is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding FIREWEED METALS P and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients and FIREWEED METALS 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 FIREWEED METALS P 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 FIREWEED METALS i.e., FIREWEED METALS and MGP Ingredients go up and down completely randomly.

Pair Corralation between FIREWEED METALS and MGP Ingredients

Assuming the 90 days horizon FIREWEED METALS P is expected to generate 0.98 times more return on investment than MGP Ingredients. However, FIREWEED METALS P is 1.03 times less risky than MGP Ingredients. It trades about 0.06 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.33 per unit of risk. If you would invest  94.00  in FIREWEED METALS P on October 24, 2024 and sell it today you would earn a total of  2.00  from holding FIREWEED METALS P or generate 2.13% return on investment over 90 days.

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

FIREWEED METALS P  vs.  MGP Ingredients

FIREWEED METALS P

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 fragile 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 FIREWEED METALS and MGP Ingredients

The main advantage of trading using opposite FIREWEED METALS and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIREWEED METALS 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 FIREWEED METALS P 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..