Correlation Between MidCap Financial and Accenture Plc

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

Diversification Opportunities for MidCap Financial and Accenture Plc

0.79

Correlation Coefficient

MidCap Financial  Accenture Plc

Poor diversification

The 3 months correlation between MidCap and Accenture is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Accenture plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accenture plc 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 Accenture Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accenture plc has no effect on the direction of MidCap Financial i.e., MidCap Financial and Accenture Plc go up and down completely randomly.

Pair Corralation between MidCap Financial and Accenture Plc

Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 0.7 times more return on investment than Accenture Plc. However, MidCap Financial Investment is 1.43 times less risky than Accenture Plc. It trades about -0.08 of its potential returns per unit of risk. Accenture plc is currently generating about -0.21 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.  Accenture plc

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.

Accenture plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Accenture plc 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MidCap Financial and Accenture Plc

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

The idea behind MidCap Financial Investment and Accenture plc 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.