Correlation Between MGIC INVESTMENT and AIR CHINA

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

By analyzing existing cross correlation between MGIC INVESTMENT and AIR CHINA LTD, you can compare the effects of market volatilities on MGIC INVESTMENT and AIR CHINA 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 AIR CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC INVESTMENT and AIR CHINA.

Diversification Opportunities for MGIC INVESTMENT and AIR CHINA

0.03

Correlation Coefficient

MGIC INVESTMENT  AIR CHINA

Significant diversification

The 3 months correlation between MGIC and AIR is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding MGIC INVESTMENT and AIR CHINA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR CHINA LTD 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 AIR CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR CHINA LTD has no effect on the direction of MGIC INVESTMENT i.e., MGIC INVESTMENT and AIR CHINA go up and down completely randomly.

Pair Corralation between MGIC INVESTMENT and AIR CHINA

Assuming the 90 days trading horizon MGIC INVESTMENT is expected to generate 20.9 times less return on investment than AIR CHINA. But when comparing it to its historical volatility, MGIC INVESTMENT is 2.23 times less risky than AIR CHINA. It trades about 0.01 of its potential returns per unit of risk. AIR CHINA LTD is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  910.00  in AIR CHINA LTD on October 25, 2024 and sell it today you would earn a total of  230.00  from holding AIR CHINA LTD or generate 25.27% return on investment over 90 days.

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

MGIC INVESTMENT  vs.  AIR CHINA LTD

MGIC INVESTMENT

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MGIC INVESTMENT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, MGIC INVESTMENT is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AIR CHINA LTD

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AIR CHINA LTD are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AIR CHINA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MGIC INVESTMENT and AIR CHINA

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

The idea behind MGIC INVESTMENT and AIR CHINA LTD 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.