Correlation Between Amazon and MidCap Financial

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

By analyzing existing cross correlation between Amazon Inc and MidCap Financial Investment, you can compare the effects of market volatilities on Amazon and MidCap 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 Amazon with a short position of MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and MidCap Financial.

Diversification Opportunities for Amazon and MidCap Financial

0.73

Correlation Coefficient

Amazon  MidCap Financial

Poor diversification

The 3 months correlation between Amazon and MidCap is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and MidCap Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidCap Financial Inv and Amazon 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 Amazon Inc are associated (or correlated) with MidCap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidCap Financial Inv has no effect on the direction of Amazon i.e., Amazon and MidCap Financial go up and down completely randomly.

Pair Corralation between Amazon and MidCap Financial

Assuming the 90 days horizon Amazon Inc is expected to under-perform the MidCap Financial. In addition to that, Amazon is 1.34 times more volatile than MidCap Financial Investment. It trades about -0.17 of its total potential returns per unit of risk. MidCap Financial Investment is currently generating about -0.06 per unit of volatility. If you would invest  1,249  in MidCap Financial Investment on December 23, 2024 and sell it today you would lose (60.00) from holding MidCap Financial Investment or give up 4.8% of portfolio value over 90 days.

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

Amazon Inc  vs.  MidCap Financial Investment

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Amazon and MidCap Financial

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

The idea behind Amazon Inc and MidCap Financial Investment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.