Correlation Between Enersys and MGIC Investment

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Can any of the company-specific risk be diversified away by investing in both Enersys 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 Enersys and MGIC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enersys and MGIC Investment Corp, you can compare the effects of market volatilities on Enersys 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 Enersys with a short position of MGIC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enersys and MGIC Investment.

Diversification Opportunities for Enersys and MGIC Investment

0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between Enersys and MGIC is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Enersys 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 Enersys 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 Enersys 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 Enersys i.e., Enersys and MGIC Investment go up and down completely randomly.

Pair Corralation between Enersys and MGIC Investment

Considering the 90-day investment horizon Enersys is expected to generate 0.76 times more return on investment than MGIC Investment. However, Enersys is 1.31 times less risky than MGIC Investment. It trades about 0.12 of its potential returns per unit of risk. MGIC Investment Corp is currently generating about 0.02 per unit of risk. If you would invest  9,124  in Enersys on February 4, 2024 and sell it today you would earn a total of  204.00  from holding Enersys or generate 2.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Enersys  vs.  MGIC Investment Corp

 Performance 
       Timeline  
Enersys 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Enersys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Enersys is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
MGIC Investment Corp 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in MGIC Investment Corp are ranked lower than 6 (%) 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.

Enersys and MGIC Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Enersys and MGIC Investment

The main advantage of trading using opposite Enersys and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enersys 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 Enersys 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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