Correlation Between Rayonier Advanced and MGP Ingredients

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

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

Diversification Opportunities for Rayonier Advanced and MGP Ingredients

-0.31

Correlation Coefficient

Rayonier Advanced  MGP Ingredients

Very good diversification

The 3 months correlation between Rayonier and MGP is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients and Rayonier Advanced 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 Rayonier Advanced Materials are associated (or correlated) with MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Rayonier Advanced i.e., Rayonier Advanced and MGP Ingredients go up and down completely randomly.

Pair Corralation between Rayonier Advanced and MGP Ingredients

Assuming the 90 days horizon Rayonier Advanced Materials is expected to generate 1.22 times more return on investment than MGP Ingredients. However, Rayonier Advanced is 1.22 times more volatile than MGP Ingredients. It trades about 0.04 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.17 per unit of risk. If you would invest  675.00  in Rayonier Advanced Materials on September 22, 2024 and sell it today you would earn a total of  25.00  from holding Rayonier Advanced Materials or generate 3.7% return on investment over 90 days.

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

Rayonier Advanced Materials  vs.  MGP Ingredients

Rayonier Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Rayonier Advanced and MGP Ingredients

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

The idea behind Rayonier Advanced Materials and MGP Ingredients 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.