Correlation Between MGIC INVESTMENT and Highlight Communications
Can any of the company-specific risk be diversified away by investing in both MGIC INVESTMENT and Highlight Communications 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 Highlight Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGIC INVESTMENT and Highlight Communications AG, you can compare the effects of market volatilities on MGIC INVESTMENT and Highlight Communications 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 Highlight Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC INVESTMENT and Highlight Communications.
Diversification Opportunities for MGIC INVESTMENT and Highlight Communications
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MGIC and Highlight is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding MGIC INVESTMENT and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications 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 Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of MGIC INVESTMENT i.e., MGIC INVESTMENT and Highlight Communications go up and down completely randomly.
Pair Corralation between MGIC INVESTMENT and Highlight Communications
Assuming the 90 days trading horizon MGIC INVESTMENT is expected to generate 0.4 times more return on investment than Highlight Communications. However, MGIC INVESTMENT is 2.52 times less risky than Highlight Communications. It trades about 0.1 of its potential returns per unit of risk. Highlight Communications AG is currently generating about -0.09 per unit of risk. If you would invest 1,570 in MGIC INVESTMENT on October 4, 2024 and sell it today you would earn a total of 730.00 from holding MGIC INVESTMENT or generate 46.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
MGIC INVESTMENT vs. Highlight Communications AG
Performance |
Timeline |
MGIC INVESTMENT |
Highlight Communications |
MGIC INVESTMENT and Highlight Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MGIC INVESTMENT and Highlight Communications
The main advantage of trading using opposite MGIC INVESTMENT and Highlight Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGIC INVESTMENT position performs unexpectedly, Highlight Communications 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 Highlight Communications will offset losses from the drop in Highlight Communications' long position.MGIC INVESTMENT vs. Apple Inc | MGIC INVESTMENT vs. Apple Inc | MGIC INVESTMENT vs. Apple Inc | MGIC INVESTMENT vs. Apple Inc |
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Check out your portfolio center.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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