Correlation Between MidCap Financial and Aegean Airlines

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

Diversification Opportunities for MidCap Financial and Aegean Airlines

-0.59

Correlation Coefficient

MidCap Financial  Aegean Airlines

Excellent diversification

The 3 months correlation between MidCap and Aegean is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Aegean Airlines SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegean Airlines SA 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 Aegean Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegean Airlines SA has no effect on the direction of MidCap Financial i.e., MidCap Financial and Aegean Airlines go up and down completely randomly.

Pair Corralation between MidCap Financial and Aegean Airlines

Assuming the 90 days trading horizon MidCap Financial Investment is expected to under-perform the Aegean Airlines. In addition to that, MidCap Financial is 1.01 times more volatile than Aegean Airlines SA. It trades about -0.14 of its total potential returns per unit of risk. Aegean Airlines SA is currently generating about 0.07 per unit of volatility. If you would invest  990.00  in Aegean Airlines SA on October 9, 2024 and sell it today you would earn a total of  13.00  from holding Aegean Airlines SA or generate 1.31% return on investment over 90 days.

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

MidCap Financial Investment  vs.  Aegean Airlines SA

MidCap Financial Inv

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 14 (%) 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.

Aegean Airlines SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegean Airlines SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aegean Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MidCap Financial and Aegean Airlines

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

The idea behind MidCap Financial Investment and Aegean Airlines SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.