Correlation Between MGIC Investment and Freeport

Can any of the company-specific risk be diversified away by investing in both MGIC Investment and Freeport 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 Freeport 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 Freeport McMoRan 4125 percent, you can compare the effects of market volatilities on MGIC Investment and Freeport 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 Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC Investment and Freeport.

Diversification Opportunities for MGIC Investment and Freeport

0.38

Correlation Coefficient

MGIC Investment  Freeport

Weak diversification

The 3 months correlation between MGIC and Freeport is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and Freeport McMoRan 4125 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 4125 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 Freeport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan 4125 has no effect on the direction of MGIC Investment i.e., MGIC Investment and Freeport go up and down completely randomly.

Pair Corralation between MGIC Investment and Freeport

Considering the 90-day investment horizon MGIC Investment Corp is expected to generate 1.88 times more return on investment than Freeport. However, MGIC Investment is 1.88 times more volatile than Freeport McMoRan 4125 percent. It trades about 0.1 of its potential returns per unit of risk. Freeport McMoRan 4125 percent is currently generating about 0.02 per unit of risk. If you would invest  1,238  in MGIC Investment Corp on September 20, 2024 and sell it today you would earn a total of  1,094  from holding MGIC Investment Corp or generate 88.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.98%
Values	Daily Returns

MGIC Investment Corp  vs.  Freeport McMoRan 4125 percent

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.

Freeport McMoRan 4125

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 4125 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MGIC Investment and Freeport

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

The idea behind MGIC Investment Corp and Freeport McMoRan 4125 percent 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.