Correlation Between MidCap Financial and CHINA VANKE

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

By analyzing existing cross correlation between MidCap Financial Investment and CHINA VANKE TD, you can compare the effects of market volatilities on MidCap Financial and CHINA VANKE 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 MidCap Financial with a short position of CHINA VANKE. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and CHINA VANKE.

Diversification Opportunities for MidCap Financial and CHINA VANKE

-0.66

Correlation Coefficient

MidCap Financial  CHINA VANKE

Excellent diversification

The 3 months correlation between MidCap and CHINA is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and CHINA VANKE TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA VANKE TD and MidCap Financial 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 MidCap Financial Investment are associated (or correlated) with CHINA VANKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA VANKE TD has no effect on the direction of MidCap Financial i.e., MidCap Financial and CHINA VANKE go up and down completely randomly.

Pair Corralation between MidCap Financial and CHINA VANKE

Assuming the 90 days trading horizon MidCap Financial is expected to generate 1.13 times less return on investment than CHINA VANKE. But when comparing it to its historical volatility, MidCap Financial Investment is 6.97 times less risky than CHINA VANKE. It trades about 0.07 of its potential returns per unit of risk. CHINA VANKE TD is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  190.00  in CHINA VANKE TD on October 11, 2024 and sell it today you would lose (128.00) from holding CHINA VANKE TD or give up 67.37% of portfolio value over 90 days.

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

MidCap Financial Investment  vs.  CHINA VANKE TD

MidCap Financial Inv

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MidCap Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CHINA VANKE TD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA VANKE TD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MidCap Financial and CHINA VANKE

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

The idea behind MidCap Financial Investment and CHINA VANKE TD 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.