Correlation Between MGIC INVESTMENT and Clarkson PLC

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

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

Diversification Opportunities for MGIC INVESTMENT and Clarkson PLC

0.72

Correlation Coefficient

MGIC INVESTMENT  Clarkson PLC

Poor diversification

The 3 months correlation between MGIC and Clarkson is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MGIC INVESTMENT and Clarkson PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarkson PLC and MGIC INVESTMENT 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 MGIC INVESTMENT are associated (or correlated) with Clarkson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarkson PLC has no effect on the direction of MGIC INVESTMENT i.e., MGIC INVESTMENT and Clarkson PLC go up and down completely randomly.

Pair Corralation between MGIC INVESTMENT and Clarkson PLC

Assuming the 90 days trading horizon MGIC INVESTMENT is expected to generate 0.42 times more return on investment than Clarkson PLC. However, MGIC INVESTMENT is 2.4 times less risky than Clarkson PLC. It trades about -0.05 of its potential returns per unit of risk. Clarkson PLC is currently generating about -0.03 per unit of risk. If you would invest  2,268  in MGIC INVESTMENT on December 21, 2024 and sell it today you would lose (108.00) from holding MGIC INVESTMENT or give up 4.76% of portfolio value over 90 days.

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

MGIC INVESTMENT  vs.  Clarkson PLC

MGIC INVESTMENT

Risk-Adjusted Performance

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.

Clarkson PLC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with MGIC INVESTMENT and Clarkson PLC

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

The idea behind MGIC INVESTMENT and Clarkson PLC 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 Stocks Directory module to find actively traded stocks across global markets.