Correlation Between MGIC Investment and AMERISAFE

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

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

Diversification Opportunities for MGIC Investment and AMERISAFE

-0.09

Correlation Coefficient

MGIC Investment  AMERISAFE

Good diversification

The 3 months correlation between MGIC and AMERISAFE is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and AMERISAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERISAFE 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 Corp are associated (or correlated) with AMERISAFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERISAFE has no effect on the direction of MGIC Investment i.e., MGIC Investment and AMERISAFE go up and down completely randomly.

Pair Corralation between MGIC Investment and AMERISAFE

Considering the 90-day investment horizon MGIC Investment Corp is expected to generate 1.26 times more return on investment than AMERISAFE. However, MGIC Investment is 1.26 times more volatile than AMERISAFE. It trades about 0.05 of its potential returns per unit of risk. AMERISAFE is currently generating about 0.05 per unit of risk. If you would invest  2,353  in MGIC Investment Corp on December 29, 2024 and sell it today you would earn a total of  87.00  from holding MGIC Investment Corp or generate 3.7% return on investment over 90 days.

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

MGIC Investment Corp  vs.  AMERISAFE

MGIC Investment Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MGIC Investment Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MGIC Investment is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

AMERISAFE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMERISAFE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AMERISAFE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MGIC Investment and AMERISAFE

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

The idea behind MGIC Investment Corp and AMERISAFE 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 Transaction History module to view history of all your transactions and understand their impact on performance.