Correlation Between MGP Ingredients and Splash Beverage

Can any of the company-specific risk be diversified away by investing in both MGP Ingredients and Splash Beverage 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 MGP Ingredients and Splash Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MGP Ingredients and Splash Beverage Group, you can compare the effects of market volatilities on MGP Ingredients and Splash Beverage 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 MGP Ingredients with a short position of Splash Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGP Ingredients and Splash Beverage.

Diversification Opportunities for MGP Ingredients and Splash Beverage

0.87

Correlation Coefficient

MGP Ingredients  Splash Beverage

Very poor diversification

The 3 months correlation between MGP and Splash is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and Splash Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Splash Beverage Group and MGP Ingredients 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 MGP Ingredients are associated (or correlated) with Splash Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Splash Beverage Group has no effect on the direction of MGP Ingredients i.e., MGP Ingredients and Splash Beverage go up and down completely randomly.

Pair Corralation between MGP Ingredients and Splash Beverage

Given the investment horizon of 90 days MGP Ingredients is expected to under-perform the Splash Beverage. But the stock apears to be less risky and, when comparing its historical volatility, MGP Ingredients is 1.26 times less risky than Splash Beverage. The stock trades about -0.23 of its potential returns per unit of risk. The Splash Beverage Group is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Splash Beverage Group on September 19, 2024 and sell it today you would lose (9.00) from holding Splash Beverage Group or give up 37.5% of portfolio value over 90 days.

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

MGP Ingredients  vs.  Splash Beverage Group

MGP Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGP Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Splash Beverage Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Splash Beverage Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with MGP Ingredients and Splash Beverage

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

The idea behind MGP Ingredients and Splash Beverage Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.