Correlation Between MGP Ingredients and Brown Forman

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

By analyzing existing cross correlation between MGP Ingredients and Brown Forman, you can compare the effects of market volatilities on MGP Ingredients and Brown Forman 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 Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGP Ingredients and Brown Forman.

Diversification Opportunities for MGP Ingredients and Brown Forman

0.5

Correlation Coefficient

MGP Ingredients  Brown Forman

Very weak diversification

The 3 months correlation between MGP and Brown is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman 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 Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of MGP Ingredients i.e., MGP Ingredients and Brown Forman go up and down completely randomly.

Pair Corralation between MGP Ingredients and Brown Forman

Given the investment horizon of 90 days MGP Ingredients is expected to generate 0.85 times more return on investment than Brown Forman. However, MGP Ingredients is 1.18 times less risky than Brown Forman. It trades about -0.07 of its potential returns per unit of risk. Brown Forman is currently generating about -0.08 per unit of risk. If you would invest  3,199  in MGP Ingredients on May 6, 2025 and sell it today you would lose (406.00) from holding MGP Ingredients or give up 12.69% of portfolio value over 90 days.

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

MGP Ingredients  vs.  Brown Forman

MGP Ingredients

Risk-Adjusted Performance

Very Weak

Over the last 90 days MGP Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Brown Forman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brown Forman 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 somewhat strong which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with MGP Ingredients and Brown Forman

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

The idea behind MGP Ingredients and Brown Forman 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.