Correlation Between MidCap Financial and G-III APPAREL

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

Diversification Opportunities for MidCap Financial and G-III APPAREL

0.61

Correlation Coefficient

MidCap Financial  G-III APPAREL

Poor diversification

The 3 months correlation between MidCap and G-III is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and G III APPAREL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G III APPAREL 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 G-III APPAREL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G III APPAREL has no effect on the direction of MidCap Financial i.e., MidCap Financial and G-III APPAREL go up and down completely randomly.

Pair Corralation between MidCap Financial and G-III APPAREL

Assuming the 90 days trading horizon MidCap Financial Investment is expected to under-perform the G-III APPAREL. But the stock apears to be less risky and, when comparing its historical volatility, MidCap Financial Investment is 2.6 times less risky than G-III APPAREL. The stock trades about -0.14 of its potential returns per unit of risk. The G III APPAREL GROUP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,960  in G III APPAREL GROUP on October 9, 2024 and sell it today you would earn a total of  160.00  from holding G III APPAREL GROUP or generate 5.41% 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.  G III APPAREL GROUP

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.

G III APPAREL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in G III APPAREL GROUP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, G-III APPAREL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MidCap Financial and G-III APPAREL

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

The idea behind MidCap Financial Investment and G III APPAREL GROUP 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.