Correlation Between MGIC Investment and First Watch

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

Diversification Opportunities for MGIC Investment and First Watch

-0.22

Correlation Coefficient

MGIC Investment  First Watch

Very good diversification

The 3 months correlation between MGIC and First is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant 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 First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of MGIC Investment i.e., MGIC Investment and First Watch go up and down completely randomly.

Pair Corralation between MGIC Investment and First Watch

Considering the 90-day investment horizon MGIC Investment Corp is expected to generate 0.58 times more return on investment than First Watch. However, MGIC Investment Corp is 1.73 times less risky than First Watch. It trades about 0.1 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.04 per unit of risk. If you would invest  1,243  in MGIC Investment Corp on September 19, 2024 and sell it today you would earn a total of  1,186  from holding MGIC Investment Corp or generate 95.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

MGIC Investment Corp  vs.  First Watch Restaurant

MGIC Investment Corp

Risk-Adjusted Performance

0 of 100

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.

First Watch Restaurant

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Watch Restaurant are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, First Watch reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MGIC Investment and First Watch

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

The idea behind MGIC Investment Corp and First Watch Restaurant 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.