Correlation Between Associated Capital and Medallion Financial

Can any of the company-specific risk be diversified away by investing in both Associated Capital and Medallion Financial 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 Associated Capital and Medallion Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Associated Capital Group and Medallion Financial Corp, you can compare the effects of market volatilities on Associated Capital and Medallion Financial 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 Associated Capital with a short position of Medallion Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Capital and Medallion Financial.

Diversification Opportunities for Associated Capital and Medallion Financial

-0.61

Correlation Coefficient

Associated Capital  Medallion Financial

Excellent diversification

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

Pair Corralation between Associated Capital and Medallion Financial

Allowing for the 90-day total investment horizon Associated Capital Group is expected to generate 0.84 times more return on investment than Medallion Financial. However, Associated Capital Group is 1.2 times less risky than Medallion Financial. It trades about 0.08 of its potential returns per unit of risk. Medallion Financial Corp is currently generating about 0.0 per unit of risk. If you would invest  3,536  in Associated Capital Group on December 30, 2024 and sell it today you would earn a total of  295.00  from holding Associated Capital Group or generate 8.34% return on investment over 90 days.

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

Associated Capital Group  vs.  Medallion Financial Corp

Associated Capital

Risk-Adjusted Performance

Modest

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

Medallion Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medallion Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Medallion Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Associated Capital and Medallion Financial

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

The idea behind Associated Capital Group and Medallion Financial Corp 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.