Correlation Between Brp and MGIC Investment

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

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

Diversification Opportunities for Brp and MGIC Investment

0.13

Correlation Coefficient

Brp  MGIC Investment

Average diversification

The 3 months correlation between Brp and MGIC is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Brp Group 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 Brp 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 Brp Group 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 Brp i.e., Brp and MGIC Investment go up and down completely randomly.

Pair Corralation between Brp and MGIC Investment

Considering the 90-day investment horizon Brp is expected to generate 1.41 times less return on investment than MGIC Investment. In addition to that, Brp is 1.91 times more volatile than MGIC Investment Corp. It trades about 0.04 of its total potential returns per unit of risk. MGIC Investment Corp is currently generating about 0.11 per unit of volatility. If you would invest  1,218  in MGIC Investment Corp on March 12, 2024 and sell it today you would earn a total of  849.00  from holding MGIC Investment Corp or generate 69.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.22%
Values	Daily Returns

Brp Group  vs.  MGIC Investment Corp

Brp Group

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Brp Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively fragile basic indicators, Brp reported solid returns over the last few months and may actually be approaching a breakup point.

MGIC Investment Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MGIC Investment Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Brp and MGIC Investment

The main advantage of trading using opposite Brp and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brp 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 Brp Group 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.