Correlation Between MGIC INVESTMENT and Solstad Offshore

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

By analyzing existing cross correlation between MGIC INVESTMENT and Solstad Offshore ASA, you can compare the effects of market volatilities on MGIC INVESTMENT and Solstad Offshore 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 Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGIC INVESTMENT and Solstad Offshore.

Diversification Opportunities for MGIC INVESTMENT and Solstad Offshore

0.59

Correlation Coefficient

MGIC INVESTMENT  Solstad Offshore

Very weak diversification

The 3 months correlation between MGIC and Solstad is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding MGIC INVESTMENT and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of MGIC INVESTMENT i.e., MGIC INVESTMENT and Solstad Offshore go up and down completely randomly.

Pair Corralation between MGIC INVESTMENT and Solstad Offshore

Assuming the 90 days trading horizon MGIC INVESTMENT is expected to under-perform the Solstad Offshore. But the stock apears to be less risky and, when comparing its historical volatility, MGIC INVESTMENT is 1.69 times less risky than Solstad Offshore. The stock trades about -0.37 of its potential returns per unit of risk. The Solstad Offshore ASA is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  345.00  in Solstad Offshore ASA on September 28, 2024 and sell it today you would lose (18.00) from holding Solstad Offshore ASA or give up 5.22% of portfolio value over 90 days.

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

MGIC INVESTMENT  vs.  Solstad Offshore ASA

MGIC INVESTMENT

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MGIC INVESTMENT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, MGIC INVESTMENT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Solstad Offshore ASA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MGIC INVESTMENT and Solstad Offshore

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

The idea behind MGIC INVESTMENT and Solstad Offshore ASA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.