Correlation Between MSP Recovery and Maiden Holdings

Can any of the company-specific risk be diversified away by investing in both MSP Recovery and Maiden Holdings 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 MSP Recovery and Maiden Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MSP Recovery and Maiden Holdings North, you can compare the effects of market volatilities on MSP Recovery and Maiden Holdings 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 MSP Recovery with a short position of Maiden Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSP Recovery and Maiden Holdings.

Diversification Opportunities for MSP Recovery and Maiden Holdings

0.38

Correlation Coefficient

MSP Recovery  Maiden Holdings

Weak diversification

The 3 months correlation between MSP and Maiden is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MSP Recovery and Maiden Holdings North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maiden Holdings North and MSP Recovery 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 MSP Recovery are associated (or correlated) with Maiden Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maiden Holdings North has no effect on the direction of MSP Recovery i.e., MSP Recovery and Maiden Holdings go up and down completely randomly.

Pair Corralation between MSP Recovery and Maiden Holdings

Given the investment horizon of 90 days MSP Recovery is expected to under-perform the Maiden Holdings. In addition to that, MSP Recovery is 8.44 times more volatile than Maiden Holdings North. It trades about 0.0 of its total potential returns per unit of risk. Maiden Holdings North is currently generating about 0.07 per unit of volatility. If you would invest  1,593  in Maiden Holdings North on December 19, 2024 and sell it today you would earn a total of  82.00  from holding Maiden Holdings North or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

MSP Recovery  vs.  Maiden Holdings North

MSP Recovery

Risk-Adjusted Performance

Weak

Over the last 90 days MSP Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, MSP Recovery is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Maiden Holdings North

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Maiden Holdings North are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Maiden Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MSP Recovery and Maiden Holdings

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

The idea behind MSP Recovery and Maiden Holdings North 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.