Correlation Between MGIC Investment and Independence Realty

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

Diversification Opportunities for MGIC Investment and Independence Realty

0.13

Correlation Coefficient

MGIC Investment  Independence Realty

Average diversification

The 3 months correlation between MGIC and Independence is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding MGIC Investment Corp and Independence Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independence Realty Trust 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 Independence Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independence Realty Trust has no effect on the direction of MGIC Investment i.e., MGIC Investment and Independence Realty go up and down completely randomly.

Pair Corralation between MGIC Investment and Independence Realty

Considering the 90-day investment horizon MGIC Investment Corp is expected to under-perform the Independence Realty. In addition to that, MGIC Investment is 1.11 times more volatile than Independence Realty Trust. It trades about -0.06 of its total potential returns per unit of risk. Independence Realty Trust is currently generating about 0.0 per unit of volatility. If you would invest  2,036  in Independence Realty Trust on September 26, 2024 and sell it today you would lose (4.00) from holding Independence Realty Trust or give up 0.2% of portfolio value over 90 days.

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

MGIC Investment Corp  vs.  Independence Realty Trust

MGIC Investment Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGIC Investment Corp 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Independence Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Independence Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Independence Realty is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MGIC Investment and Independence Realty

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

The idea behind MGIC Investment Corp and Independence Realty Trust 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.