Correlation Between MGIC Investment and Joby Aviation

Can any of the company-specific risk be diversified away by investing in both MGIC Investment and Joby Aviation 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 Joby Aviation 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 Joby Aviation, you can compare the effects of market volatilities on MGIC Investment and Joby Aviation 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 Joby Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC Investment and Joby Aviation.

Diversification Opportunities for MGIC Investment and Joby Aviation

-0.35

Correlation Coefficient

MGIC Investment  Joby Aviation

Very good diversification

The 3 months correlation between MGIC and Joby is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and Joby Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joby Aviation 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 Joby Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joby Aviation has no effect on the direction of MGIC Investment i.e., MGIC Investment and Joby Aviation go up and down completely randomly.

Pair Corralation between MGIC Investment and Joby Aviation

Considering the 90-day investment horizon MGIC Investment is expected to generate 17.37 times less return on investment than Joby Aviation. But when comparing it to its historical volatility, MGIC Investment Corp is 2.3 times less risky than Joby Aviation. It trades about 0.02 of its potential returns per unit of risk. Joby Aviation is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  490.00  in Joby Aviation on February 4, 2024 and sell it today you would earn a total of  48.00  from holding Joby Aviation or generate 9.8% return on investment over 90 days.

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

MGIC Investment Corp  vs.  Joby Aviation

MGIC Investment Corp

Risk-Adjusted Performance

6 of 100

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.

Joby Aviation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joby Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Joby Aviation is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MGIC Investment and Joby Aviation

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

The idea behind MGIC Investment Corp and Joby Aviation 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.