Correlation Between MidCap Financial and AOYAMA TRADING

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

Diversification Opportunities for MidCap Financial and AOYAMA TRADING

0.93

Correlation Coefficient

MidCap Financial  AOYAMA TRADING

Almost no diversification

The 3 months correlation between MidCap and AOYAMA is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and AOYAMA TRADING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOYAMA TRADING 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 AOYAMA TRADING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOYAMA TRADING has no effect on the direction of MidCap Financial i.e., MidCap Financial and AOYAMA TRADING go up and down completely randomly.

Pair Corralation between MidCap Financial and AOYAMA TRADING

Assuming the 90 days trading horizon MidCap Financial Investment is expected to under-perform the AOYAMA TRADING. But the stock apears to be less risky and, when comparing its historical volatility, MidCap Financial Investment is 1.38 times less risky than AOYAMA TRADING. The stock trades about -0.14 of its potential returns per unit of risk. The AOYAMA TRADING is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,410  in AOYAMA TRADING on October 9, 2024 and sell it today you would lose (20.00) from holding AOYAMA TRADING or give up 1.42% of portfolio value over 90 days.

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

MidCap Financial Investment  vs.  AOYAMA TRADING

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.

AOYAMA TRADING

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AOYAMA TRADING are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AOYAMA TRADING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MidCap Financial and AOYAMA TRADING

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

The idea behind MidCap Financial Investment and AOYAMA TRADING 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.