Correlation Between MGP Ingredients and Fresh Grapes

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

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

Diversification Opportunities for MGP Ingredients and Fresh Grapes

-0.13

Correlation Coefficient

MGP Ingredients  Fresh Grapes

Good diversification

The 3 months correlation between MGP and Fresh is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and Fresh Grapes LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresh Grapes LLC 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 Fresh Grapes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresh Grapes LLC has no effect on the direction of MGP Ingredients i.e., MGP Ingredients and Fresh Grapes go up and down completely randomly.

Pair Corralation between MGP Ingredients and Fresh Grapes

Given the investment horizon of 90 days MGP Ingredients is expected to under-perform the Fresh Grapes. But the stock apears to be less risky and, when comparing its historical volatility, MGP Ingredients is 2.89 times less risky than Fresh Grapes. The stock trades about -0.08 of its potential returns per unit of risk. The Fresh Grapes LLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Fresh Grapes LLC on September 12, 2024 and sell it today you would earn a total of  13.00  from holding Fresh Grapes LLC or generate 24.07% return on investment over 90 days.

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

MGP Ingredients  vs.  Fresh Grapes LLC

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.

Fresh Grapes LLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Grapes LLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Fresh Grapes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MGP Ingredients and Fresh Grapes

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

The idea behind MGP Ingredients and Fresh Grapes LLC 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.