Correlation Between CNO Financial and Medallion Financial

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

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

Diversification Opportunities for CNO Financial and Medallion Financial

-0.57

Correlation Coefficient

CNO Financial  Medallion Financial

Excellent diversification

The 3 months correlation between CNO and Medallion is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding CNO Financial 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 CNO 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 CNO Financial 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 CNO Financial i.e., CNO Financial and Medallion Financial go up and down completely randomly.

Pair Corralation between CNO Financial and Medallion Financial

Assuming the 90 days trading horizon CNO Financial Group is expected to under-perform the Medallion Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, CNO Financial Group is 1.5 times less risky than Medallion Financial. The preferred stock trades about -0.18 of its potential returns per unit of risk. The Medallion Financial Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  937.00  in Medallion Financial Corp on October 10, 2024 and sell it today you would earn a total of  3.00  from holding Medallion Financial Corp or generate 0.32% return on investment over 90 days.

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

CNO Financial Group  vs.  Medallion Financial Corp

CNO Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNO Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Medallion Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Medallion Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNO Financial and Medallion Financial

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

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.