Correlation Between MGIC Investment and SMUCKER

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

Diversification Opportunities for MGIC Investment and SMUCKER

0.07

Correlation Coefficient

MGIC Investment  SMUCKER

Significant diversification

The 3 months correlation between MGIC and SMUCKER is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and SMUCKER J M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMUCKER J M 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 SMUCKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMUCKER J M has no effect on the direction of MGIC Investment i.e., MGIC Investment and SMUCKER go up and down completely randomly.

Pair Corralation between MGIC Investment and SMUCKER

Considering the 90-day investment horizon MGIC Investment Corp is expected to under-perform the SMUCKER. In addition to that, MGIC Investment is 1.28 times more volatile than SMUCKER J M. It trades about -0.19 of its total potential returns per unit of risk. SMUCKER J M is currently generating about 0.29 per unit of volatility. If you would invest  8,162  in SMUCKER J M on December 5, 2024 and sell it today you would earn a total of  328.00  from holding SMUCKER J M or generate 4.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	61.9%
Values	Daily Returns

MGIC Investment Corp  vs.  SMUCKER J M

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 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.

SMUCKER J M

Risk-Adjusted Performance

Very Weak

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

Pair Trading with MGIC Investment and SMUCKER

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

The idea behind MGIC Investment Corp and SMUCKER J M 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.