Correlation Between EchoStar and MGP Ingredients

Can any of the company-specific risk be diversified away by investing in both EchoStar and MGP Ingredients 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 EchoStar and MGP Ingredients into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EchoStar and MGP Ingredients, you can compare the effects of market volatilities on EchoStar and MGP Ingredients 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 EchoStar with a short position of MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of EchoStar and MGP Ingredients.

Diversification Opportunities for EchoStar and MGP Ingredients

0.43

Correlation Coefficient

EchoStar  MGP Ingredients

Very weak diversification

The 3 months correlation between EchoStar and MGP is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding EchoStar and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients and EchoStar 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 EchoStar are associated (or correlated) with MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of EchoStar i.e., EchoStar and MGP Ingredients go up and down completely randomly.

Pair Corralation between EchoStar and MGP Ingredients

Given the investment horizon of 90 days EchoStar is expected to generate 1.62 times more return on investment than MGP Ingredients. However, EchoStar is 1.62 times more volatile than MGP Ingredients. It trades about 0.03 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.06 per unit of risk. If you would invest  1,807  in EchoStar on October 4, 2024 and sell it today you would earn a total of  419.50  from holding EchoStar or generate 23.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

EchoStar  vs.  MGP Ingredients

EchoStar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EchoStar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EchoStar is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

MGP Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGP Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with EchoStar and MGP Ingredients

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

The idea behind EchoStar and MGP Ingredients 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.