Correlation Between Splash Beverage and MGP Ingredients

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

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

Diversification Opportunities for Splash Beverage and MGP Ingredients

0.87

Correlation Coefficient

Splash Beverage  MGP Ingredients

Very poor diversification

The 3 months correlation between Splash and MGP is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Splash Beverage Group and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients and Splash Beverage 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 Splash Beverage Group 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 Splash Beverage i.e., Splash Beverage and MGP Ingredients go up and down completely randomly.

Pair Corralation between Splash Beverage and MGP Ingredients

Given the investment horizon of 90 days Splash Beverage Group is expected to generate 1.26 times more return on investment than MGP Ingredients. However, Splash Beverage is 1.26 times more volatile than MGP Ingredients. It trades about -0.12 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.23 per unit of risk. 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

Splash Beverage Group  vs.  MGP Ingredients

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.

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.

Pair Trading with Splash Beverage and MGP Ingredients

The main advantage of trading using opposite Splash Beverage and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Splash Beverage 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 Splash Beverage Group 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.