Correlation Between MidCap Financial and Waste Management

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

Diversification Opportunities for MidCap Financial and Waste Management

0.48

Correlation Coefficient

MidCap Financial  Waste Management

Very weak diversification

The 3 months correlation between MidCap and Waste is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of MidCap Financial i.e., MidCap Financial and Waste Management go up and down completely randomly.

Pair Corralation between MidCap Financial and Waste Management

Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 0.89 times more return on investment than Waste Management. However, MidCap Financial Investment is 1.12 times less risky than Waste Management. It trades about 0.14 of its potential returns per unit of risk. Waste Management is currently generating about 0.08 per unit of risk. If you would invest  1,204  in MidCap Financial Investment on October 24, 2024 and sell it today you would earn a total of  112.00  from holding MidCap Financial Investment or generate 9.3% return on investment over 90 days.

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

MidCap Financial Investment  vs.  Waste Management

MidCap Financial Inv

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 10 (%) 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.

Waste Management

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with MidCap Financial and Waste Management

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

The idea behind MidCap Financial Investment and Waste Management 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.