Correlation Between Investors Title and MGIC Investment

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

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

Diversification Opportunities for Investors Title and MGIC Investment

0.19

Correlation Coefficient

Investors Title  MGIC Investment

Average diversification

The 3 months correlation between Investors and MGIC is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Investors Title 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 Investors Title 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 Investors Title 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 Investors Title i.e., Investors Title and MGIC Investment go up and down completely randomly.

Pair Corralation between Investors Title and MGIC Investment

Given the investment horizon of 90 days Investors Title is expected to generate 2.37 times more return on investment than MGIC Investment. However, Investors Title is 2.37 times more volatile than MGIC Investment Corp. It trades about 0.22 of its potential returns per unit of risk. MGIC Investment Corp is currently generating about 0.11 per unit of risk. If you would invest  16,208  in Investors Title on March 2, 2024 and sell it today you would earn a total of  2,202  from holding Investors Title or generate 13.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Investors Title  vs.  MGIC Investment Corp

Investors Title

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Investors Title are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Investors Title exhibited solid returns over the last few months and may actually be approaching a breakup point.

MGIC Investment Corp

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MGIC Investment Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, MGIC Investment may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Investors Title and MGIC Investment

The main advantage of trading using opposite Investors Title and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investors Title 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 Investors Title 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.