Correlation Between MGP Ingredients and Crimson Wine

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

By analyzing existing cross correlation between MGP Ingredients and Crimson Wine, you can compare the effects of market volatilities on MGP Ingredients and Crimson Wine 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 Crimson Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGP Ingredients and Crimson Wine.

Diversification Opportunities for MGP Ingredients and Crimson Wine

-0.59

Correlation Coefficient

MGP Ingredients  Crimson Wine

Excellent diversification

The 3 months correlation between MGP and Crimson is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine 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 Crimson Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crimson Wine has no effect on the direction of MGP Ingredients i.e., MGP Ingredients and Crimson Wine go up and down completely randomly.

Pair Corralation between MGP Ingredients and Crimson Wine

Given the investment horizon of 90 days MGP Ingredients is expected to under-perform the Crimson Wine. In addition to that, MGP Ingredients is 1.34 times more volatile than Crimson Wine. It trades about -0.03 of its total potential returns per unit of risk. Crimson Wine is currently generating about -0.04 per unit of volatility. If you would invest  656.00  in Crimson Wine on September 5, 2024 and sell it today you would lose (11.00) from holding Crimson Wine or give up 1.68% of portfolio value over 90 days.

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

MGP Ingredients  vs.  Crimson Wine

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. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Crimson Wine

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crimson Wine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Crimson Wine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MGP Ingredients and Crimson Wine

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

The idea behind MGP Ingredients and Crimson Wine 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.