Correlation Between MGIC Investment and Playtech Plc

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

Diversification Opportunities for MGIC Investment and Playtech Plc

-0.18

Correlation Coefficient

MGIC Investment  Playtech Plc

Good diversification

The 3 months correlation between MGIC and Playtech is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc 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 Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech plc has no effect on the direction of MGIC Investment i.e., MGIC Investment and Playtech Plc go up and down completely randomly.

Pair Corralation between MGIC Investment and Playtech Plc

Considering the 90-day investment horizon MGIC Investment Corp is expected to generate 0.58 times more return on investment than Playtech Plc. However, MGIC Investment Corp is 1.74 times less risky than Playtech Plc. It trades about 0.1 of its potential returns per unit of risk. Playtech plc is currently generating about 0.05 per unit of risk. If you would invest  1,248  in MGIC Investment Corp on September 23, 2024 and sell it today you would earn a total of  1,118  from holding MGIC Investment Corp or generate 89.58% 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.  Playtech plc

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 latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Playtech plc

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with MGIC Investment and Playtech Plc

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

The idea behind MGIC Investment Corp and Playtech plc 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.