Correlation Between MidCap Financial and TOWNSQUARE MEDIA

Can any of the company-specific risk be diversified away by investing in both MidCap Financial and TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA INC, you can compare the effects of market volatilities on MidCap Financial and TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and TOWNSQUARE MEDIA.

Diversification Opportunities for MidCap Financial and TOWNSQUARE MEDIA

0.65

Correlation Coefficient

MidCap Financial  TOWNSQUARE MEDIA

Poor diversification

The 3 months correlation between MidCap and TOWNSQUARE is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and TOWNSQUARE MEDIA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOWNSQUARE MEDIA INC 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 TOWNSQUARE MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOWNSQUARE MEDIA INC has no effect on the direction of MidCap Financial i.e., MidCap Financial and TOWNSQUARE MEDIA go up and down completely randomly.

Pair Corralation between MidCap Financial and TOWNSQUARE MEDIA

Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 0.5 times more return on investment than TOWNSQUARE MEDIA. However, MidCap Financial Investment is 1.98 times less risky than TOWNSQUARE MEDIA. It trades about -0.08 of its potential returns per unit of risk. TOWNSQUARE MEDIA INC is currently generating about -0.13 per unit of risk. If you would invest  1,263  in MidCap Financial Investment on December 24, 2024 and sell it today you would lose (74.00) from holding MidCap Financial Investment or give up 5.86% of portfolio value over 90 days.

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

MidCap Financial Investment  vs.  TOWNSQUARE MEDIA INC

MidCap Financial Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days MidCap Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MidCap Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

TOWNSQUARE MEDIA INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days TOWNSQUARE MEDIA INC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with MidCap Financial and TOWNSQUARE MEDIA

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

The idea behind MidCap Financial Investment and TOWNSQUARE MEDIA INC 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.