Correlation Between SMUCKER and MGIC Investment

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

By analyzing existing cross correlation between SMUCKER J M and MGIC Investment Corp, you can compare the effects of market volatilities on SMUCKER and MGIC Investment 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 SMUCKER with a short position of MGIC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMUCKER and MGIC Investment.

Diversification Opportunities for SMUCKER and MGIC Investment

-0.57

Correlation Coefficient

SMUCKER  MGIC Investment

Excellent diversification

The 3 months correlation between SMUCKER and MGIC is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding SMUCKER J M and MGIC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC Investment Corp and SMUCKER 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 SMUCKER J M are associated (or correlated) with MGIC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC Investment Corp has no effect on the direction of SMUCKER i.e., SMUCKER and MGIC Investment go up and down completely randomly.

Pair Corralation between SMUCKER and MGIC Investment

Assuming the 90 days trading horizon SMUCKER J M is expected to under-perform the MGIC Investment. But the bond apears to be less risky and, when comparing its historical volatility, SMUCKER J M is 1.51 times less risky than MGIC Investment. The bond trades about -0.12 of its potential returns per unit of risk. The MGIC Investment Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,542  in MGIC Investment Corp on September 16, 2024 and sell it today you would lose (87.00) from holding MGIC Investment Corp or give up 3.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	46.15%
Values	Daily Returns

SMUCKER J M  vs.  MGIC Investment Corp

SMUCKER J M

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SMUCKER J M investors.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SMUCKER and MGIC Investment

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

The idea behind SMUCKER J M and MGIC Investment Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.