Correlation Between MGP Ingredients and Grand Canyon

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

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

Diversification Opportunities for MGP Ingredients and Grand Canyon

-0.78

Correlation Coefficient

MGP Ingredients  Grand Canyon

Pay attention - limited upside

The 3 months correlation between MGP and Grand is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and Grand Canyon Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Canyon Education and MGP Ingredients 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 MGP Ingredients are associated (or correlated) with Grand Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Canyon Education has no effect on the direction of MGP Ingredients i.e., MGP Ingredients and Grand Canyon go up and down completely randomly.

Pair Corralation between MGP Ingredients and Grand Canyon

Assuming the 90 days trading horizon MGP Ingredients is expected to under-perform the Grand Canyon. But the stock apears to be less risky and, when comparing its historical volatility, MGP Ingredients is 1.22 times less risky than Grand Canyon. The stock trades about -0.1 of its potential returns per unit of risk. The Grand Canyon Education is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  12,700  in Grand Canyon Education on October 6, 2024 and sell it today you would earn a total of  3,100  from holding Grand Canyon Education or generate 24.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

MGP Ingredients  vs.  Grand Canyon Education

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.

Grand Canyon Education

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MGP Ingredients and Grand Canyon

The main advantage of trading using opposite MGP Ingredients and Grand Canyon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGP Ingredients position performs unexpectedly, Grand Canyon 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 Grand Canyon will offset losses from the drop in Grand Canyon's long position.

The idea behind MGP Ingredients and Grand Canyon Education 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.