Correlation Between Carbios and MGI Digital

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

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

Diversification Opportunities for Carbios and MGI Digital

0.45

Correlation Coefficient

Carbios  MGI Digital

Very weak diversification

The 3 months correlation between Carbios and MGI is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Carbios and MGI Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGI Digital and Carbios 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 Carbios are associated (or correlated) with MGI Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGI Digital has no effect on the direction of Carbios i.e., Carbios and MGI Digital go up and down completely randomly.

Pair Corralation between Carbios and MGI Digital

Assuming the 90 days trading horizon Carbios is expected to under-perform the MGI Digital. In addition to that, Carbios is 1.34 times more volatile than MGI Digital. It trades about -0.07 of its total potential returns per unit of risk. MGI Digital is currently generating about 0.01 per unit of volatility. If you would invest  1,556  in MGI Digital on June 23, 2024 and sell it today you would lose (22.00) from holding MGI Digital or give up 1.41% of portfolio value over 90 days.

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

Carbios  vs.  MGI Digital

Carbios

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carbios has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

MGI Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGI Digital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Carbios and MGI Digital

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

The idea behind Carbios and MGI Digital 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.