Correlation Between Interactive Brokers and Medallion Financial

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

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

Diversification Opportunities for Interactive Brokers and Medallion Financial

0.72

Correlation Coefficient

Interactive Brokers  Medallion Financial

Poor diversification

The 3 months correlation between Interactive and Medallion is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Interactive Brokers 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 Interactive Brokers 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 Interactive Brokers 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 Interactive Brokers i.e., Interactive Brokers and Medallion Financial go up and down completely randomly.

Pair Corralation between Interactive Brokers and Medallion Financial

Given the investment horizon of 90 days Interactive Brokers Group is expected to generate 1.08 times more return on investment than Medallion Financial. However, Interactive Brokers is 1.08 times more volatile than Medallion Financial Corp. It trades about 0.2 of its potential returns per unit of risk. Medallion Financial Corp is currently generating about 0.13 per unit of risk. If you would invest  14,844  in Interactive Brokers Group on October 10, 2024 and sell it today you would earn a total of  4,273  from holding Interactive Brokers Group or generate 28.79% return on investment over 90 days.

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

Interactive Brokers Group  vs.  Medallion Financial Corp

Interactive Brokers

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Interactive Brokers Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, Interactive Brokers reported solid returns over the last few months and may actually be approaching a breakup point.

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 Interactive Brokers and Medallion Financial

The main advantage of trading using opposite Interactive Brokers and Medallion Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interactive Brokers 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 Interactive Brokers 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 CEOs Directory module to screen CEOs from public companies around the world.