Correlation Between Scharf Balanced and Mesirow Financial

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

By analyzing existing cross correlation between Scharf Balanced Opportunity and Mesirow Financial Small, you can compare the effects of market volatilities on Scharf Balanced and Mesirow 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 Scharf Balanced with a short position of Mesirow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scharf Balanced and Mesirow Financial.

Diversification Opportunities for Scharf Balanced and Mesirow Financial

0.94

Correlation Coefficient

Scharf Balanced  Mesirow Financial

Almost no diversification

The 3 months correlation between Scharf and Mesirow is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Scharf Balanced Opportunity and Mesirow Financial Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesirow Financial Small and Scharf Balanced 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 Scharf Balanced Opportunity are associated (or correlated) with Mesirow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesirow Financial Small has no effect on the direction of Scharf Balanced i.e., Scharf Balanced and Mesirow Financial go up and down completely randomly.

Pair Corralation between Scharf Balanced and Mesirow Financial

Assuming the 90 days horizon Scharf Balanced is expected to generate 2.12 times less return on investment than Mesirow Financial. But when comparing it to its historical volatility, Scharf Balanced Opportunity is 2.5 times less risky than Mesirow Financial. It trades about 0.17 of its potential returns per unit of risk. Mesirow Financial Small is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,310  in Mesirow Financial Small on September 5, 2024 and sell it today you would earn a total of  122.00  from holding Mesirow Financial Small or generate 9.31% return on investment over 90 days.

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

Scharf Balanced Opportunity  vs.  Mesirow Financial Small

Scharf Balanced Oppo

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scharf Balanced Opportunity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Scharf Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mesirow Financial Small

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mesirow Financial Small are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mesirow Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Scharf Balanced and Mesirow Financial

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

The idea behind Scharf Balanced Opportunity and Mesirow Financial Small 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.