Correlation Between MidCap Financial and Stockland

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

Diversification Opportunities for MidCap Financial and Stockland

0.82

Correlation Coefficient

MidCap Financial  Stockland

Very poor diversification

The 3 months correlation between MidCap and Stockland is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Stockland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stockland 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 Stockland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stockland has no effect on the direction of MidCap Financial i.e., MidCap Financial and Stockland go up and down completely randomly.

Pair Corralation between MidCap Financial and Stockland

Assuming the 90 days trading horizon MidCap Financial Investment is expected to under-perform the Stockland. But the stock apears to be less risky and, when comparing its historical volatility, MidCap Financial Investment is 1.19 times less risky than Stockland. The stock trades about -0.06 of its potential returns per unit of risk. The Stockland is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  277.00  in Stockland on December 23, 2024 and sell it today you would earn a total of  3.00  from holding Stockland or generate 1.08% return on investment over 90 days.

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

MidCap Financial Investment  vs.  Stockland

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.

Stockland

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stockland are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Stockland is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MidCap Financial and Stockland

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

The idea behind MidCap Financial Investment and Stockland 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.