Correlation Between Apple and MidCap Financial

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

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

Diversification Opportunities for Apple and MidCap Financial

0.83

Correlation Coefficient

Apple  MidCap Financial

Very poor diversification

The 3 months correlation between Apple and MidCap is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Apple 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 Apple 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 Apple 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 Apple i.e., Apple and MidCap Financial go up and down completely randomly.

Pair Corralation between Apple and MidCap Financial

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.85 times more return on investment than MidCap Financial. However, Apple Inc is 1.17 times less risky than MidCap Financial. It trades about 0.39 of its potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.28 per unit of risk. If you would invest  20,370  in Apple Inc on October 6, 2024 and sell it today you would earn a total of  3,225  from holding Apple Inc or generate 15.83% return on investment over 90 days.

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

Apple Inc  vs.  MidCap Financial Investment

Apple Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

MidCap Financial Inv

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MidCap Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Apple and MidCap Financial

The main advantage of trading using opposite Apple and MidCap Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.