Correlation Between MidCap Financial and GUDANG GARAM

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

Diversification Opportunities for MidCap Financial and GUDANG GARAM

-0.78

Correlation Coefficient

MidCap Financial  GUDANG GARAM

Pay attention - limited upside

The 3 months correlation between MidCap and GUDANG is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and GUDANG GARAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUDANG GARAM 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 GUDANG GARAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUDANG GARAM has no effect on the direction of MidCap Financial i.e., MidCap Financial and GUDANG GARAM go up and down completely randomly.

Pair Corralation between MidCap Financial and GUDANG GARAM

Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 0.55 times more return on investment than GUDANG GARAM. However, MidCap Financial Investment is 1.8 times less risky than GUDANG GARAM. It trades about 0.07 of its potential returns per unit of risk. GUDANG GARAM is currently generating about -0.01 per unit of risk. If you would invest  877.00  in MidCap Financial Investment on October 4, 2024 and sell it today you would earn a total of  418.00  from holding MidCap Financial Investment or generate 47.66% return on investment over 90 days.

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

MidCap Financial Investment  vs.  GUDANG GARAM

MidCap Financial Inv

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MidCap Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GUDANG GARAM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GUDANG GARAM 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with MidCap Financial and GUDANG GARAM

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

The idea behind MidCap Financial Investment and GUDANG GARAM 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.