Correlation Between MBIA and MGIC Investment

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

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

Diversification Opportunities for MBIA and MGIC Investment

0.0

Correlation Coefficient

MBIA  MGIC Investment

Pay attention - limited upside

The 3 months correlation between MBIA and MGIC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MBIA Inc 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 MBIA 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 MBIA Inc 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 MBIA i.e., MBIA and MGIC Investment go up and down completely randomly.

Pair Corralation between MBIA and MGIC Investment

Considering the 90-day investment horizon MBIA Inc is expected to generate 4.4 times more return on investment than MGIC Investment. However, MBIA is 4.4 times more volatile than MGIC Investment Corp. It trades about 0.05 of its potential returns per unit of risk. MGIC Investment Corp is currently generating about 0.1 per unit of risk. If you would invest  354.00  in MBIA Inc on February 24, 2024 and sell it today you would earn a total of  206.00  from holding MBIA Inc or generate 58.19% return on investment over 90 days.

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

MBIA Inc  vs.  MGIC Investment Corp

MBIA Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MBIA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

MGIC Investment Corp

Risk-Adjusted Performance

5 of 100

Modest

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 unsteady basic indicators, MGIC Investment may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with MBIA and MGIC Investment

The main advantage of trading using opposite MBIA and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MBIA 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 MBIA Inc 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.