Correlation Between MidCap Financial and CDL INVESTMENT

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

Diversification Opportunities for MidCap Financial and CDL INVESTMENT

0.67

Correlation Coefficient

MidCap Financial  CDL INVESTMENT

Poor diversification

The 3 months correlation between MidCap and CDL is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and CDL INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDL INVESTMENT 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 CDL INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDL INVESTMENT has no effect on the direction of MidCap Financial i.e., MidCap Financial and CDL INVESTMENT go up and down completely randomly.

Pair Corralation between MidCap Financial and CDL INVESTMENT

Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 0.58 times more return on investment than CDL INVESTMENT. However, MidCap Financial Investment is 1.72 times less risky than CDL INVESTMENT. It trades about 0.13 of its potential returns per unit of risk. CDL INVESTMENT is currently generating about 0.01 per unit of risk. If you would invest  1,204  in MidCap Financial Investment on October 24, 2024 and sell it today you would earn a total of  107.00  from holding MidCap Financial Investment or generate 8.89% return on investment over 90 days.

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

MidCap Financial Investment  vs.  CDL INVESTMENT

MidCap Financial Inv

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, MidCap Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CDL INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDL INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CDL INVESTMENT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MidCap Financial and CDL INVESTMENT

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

The idea behind MidCap Financial Investment and CDL INVESTMENT 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.