Correlation Between MGIC Investment and MARATHON

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

Diversification Opportunities for MGIC Investment and MARATHON

0.48

Correlation Coefficient

MGIC Investment  MARATHON

Very weak diversification

The 3 months correlation between MGIC and MARATHON is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and MARATHON PETE P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARATHON PETE P 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 MARATHON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARATHON PETE P has no effect on the direction of MGIC Investment i.e., MGIC Investment and MARATHON go up and down completely randomly.

Pair Corralation between MGIC Investment and MARATHON

Considering the 90-day investment horizon MGIC Investment Corp is expected to generate 0.81 times more return on investment than MARATHON. However, MGIC Investment Corp is 1.23 times less risky than MARATHON. It trades about 0.09 of its potential returns per unit of risk. MARATHON PETE P is currently generating about 0.0 per unit of risk. If you would invest  1,297  in MGIC Investment Corp on October 10, 2024 and sell it today you would earn a total of  1,066  from holding MGIC Investment Corp or generate 82.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	77.42%
Values	Daily Returns

MGIC Investment Corp  vs.  MARATHON PETE P

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.

MARATHON PETE P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MGIC Investment and MARATHON

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

The idea behind MGIC Investment Corp and MARATHON PETE P 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.