Correlation Between PT Bank and MGIC Investment

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

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

Diversification Opportunities for PT Bank and MGIC Investment

-0.36

Correlation Coefficient

PT Bank  MGIC Investment

Very good diversification

The 3 months correlation between BZG2 and MGIC is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and MGIC Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC Investment and PT Bank 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 PT Bank Central 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 has no effect on the direction of PT Bank i.e., PT Bank and MGIC Investment go up and down completely randomly.

Pair Corralation between PT Bank and MGIC Investment

Assuming the 90 days trading horizon PT Bank Central is expected to under-perform the MGIC Investment. In addition to that, PT Bank is 2.54 times more volatile than MGIC Investment. It trades about 0.0 of its total potential returns per unit of risk. MGIC Investment is currently generating about 0.01 per unit of volatility. If you would invest  2,247  in MGIC Investment on September 23, 2024 and sell it today you would lose (7.00) from holding MGIC Investment or give up 0.31% of portfolio value over 90 days.

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

PT Bank Central  vs.  MGIC Investment

PT Bank Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MGIC Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGIC Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MGIC Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Bank and MGIC Investment

The main advantage of trading using opposite PT Bank and MGIC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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 PT Bank Central and MGIC Investment 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.