Correlation Between MidCap Financial and THRACE PLASTICS

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

Diversification Opportunities for MidCap Financial and THRACE PLASTICS

-0.02

Correlation Coefficient

MidCap Financial  THRACE PLASTICS

Good diversification

The 3 months correlation between MidCap and THRACE is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and THRACE PLASTICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THRACE PLASTICS 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 THRACE PLASTICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THRACE PLASTICS has no effect on the direction of MidCap Financial i.e., MidCap Financial and THRACE PLASTICS go up and down completely randomly.

Pair Corralation between MidCap Financial and THRACE PLASTICS

Assuming the 90 days trading horizon MidCap Financial Investment is expected to under-perform the THRACE PLASTICS. But the stock apears to be less risky and, when comparing its historical volatility, MidCap Financial Investment is 1.28 times less risky than THRACE PLASTICS. The stock trades about -0.07 of its potential returns per unit of risk. The THRACE PLASTICS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  387.00  in THRACE PLASTICS on December 22, 2024 and sell it today you would earn a total of  30.00  from holding THRACE PLASTICS or generate 7.75% return on investment over 90 days.

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

MidCap Financial Investment  vs.  THRACE PLASTICS

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.

THRACE PLASTICS

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in THRACE PLASTICS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, THRACE PLASTICS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with MidCap Financial and THRACE PLASTICS

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

The idea behind MidCap Financial Investment and THRACE PLASTICS 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.