Correlation Between CITIC and MidCap Financial

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

By analyzing existing cross correlation between CITIC LTD ADR5 and MidCap Financial Investment, you can compare the effects of market volatilities on CITIC 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 CITIC with a short position of MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC and MidCap Financial.

Diversification Opportunities for CITIC and MidCap Financial

-0.36

Correlation Coefficient

CITIC  MidCap Financial

Very good diversification

The 3 months correlation between CITIC and MidCap is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CITIC LTD ADR5 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 CITIC 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 CITIC LTD ADR5 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 CITIC i.e., CITIC and MidCap Financial go up and down completely randomly.

Pair Corralation between CITIC and MidCap Financial

Assuming the 90 days trading horizon CITIC is expected to generate 1.31 times less return on investment than MidCap Financial. In addition to that, CITIC is 1.73 times more volatile than MidCap Financial Investment. It trades about 0.03 of its total potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.07 per unit of volatility. If you would invest  888.00  in MidCap Financial Investment on October 26, 2024 and sell it today you would earn a total of  418.00  from holding MidCap Financial Investment or generate 47.07% return on investment over 90 days.

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

CITIC LTD ADR5  vs.  MidCap Financial Investment

CITIC LTD ADR5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC LTD ADR5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CITIC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MidCap Financial Inv

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 9 (%) 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.

Pair Trading with CITIC and MidCap Financial

The main advantage of trading using opposite CITIC and MidCap Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC 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 CITIC LTD ADR5 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .