Correlation Between MGIC Investment and China XD

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

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

Diversification Opportunities for MGIC Investment and China XD

-0.13

Correlation Coefficient

MGIC Investment  China XD

Good diversification

The 3 months correlation between MGIC and China is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and China XD Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China XD Plastics and MGIC Investment 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 MGIC Investment Corp are associated (or correlated) with China XD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China XD Plastics has no effect on the direction of MGIC Investment i.e., MGIC Investment and China XD go up and down completely randomly.

Pair Corralation between MGIC Investment and China XD

If you would invest  1,979  in MGIC Investment Corp on February 11, 2024 and sell it today you would earn a total of  146.00  from holding MGIC Investment Corp or generate 7.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

MGIC Investment Corp  vs.  China XD Plastics

MGIC Investment Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MGIC Investment Corp are ranked lower than 9 (%) 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 June 2024.

China XD Plastics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China XD Plastics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, China XD is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MGIC Investment and China XD

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

The idea behind MGIC Investment Corp and China XD Plastics 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.