Correlation Between MGIC Investment and Bright Scholar

Can any of the company-specific risk be diversified away by investing in both MGIC Investment and Bright Scholar 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 Bright Scholar 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 Bright Scholar Education, you can compare the effects of market volatilities on MGIC Investment and Bright Scholar 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 Bright Scholar. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC Investment and Bright Scholar.

Diversification Opportunities for MGIC Investment and Bright Scholar

0.38

Correlation Coefficient

MGIC Investment  Bright Scholar

Weak diversification

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

Pair Corralation between MGIC Investment and Bright Scholar

Considering the 90-day investment horizon MGIC Investment Corp is expected to generate 0.21 times more return on investment than Bright Scholar. However, MGIC Investment Corp is 4.72 times less risky than Bright Scholar. It trades about -0.01 of its potential returns per unit of risk. Bright Scholar Education is currently generating about -0.04 per unit of risk. If you would invest  2,326  in MGIC Investment Corp on December 18, 2024 and sell it today you would lose (21.00) from holding MGIC Investment Corp or give up 0.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

MGIC Investment Corp  vs.  Bright Scholar Education

MGIC Investment Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days MGIC Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Bright Scholar Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bright Scholar Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with MGIC Investment and Bright Scholar

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

The idea behind MGIC Investment Corp and Bright Scholar Education 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.