Correlation Between MidCap Financial and Federated Premier

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

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

Diversification Opportunities for MidCap Financial and Federated Premier

0.62

Correlation Coefficient

MidCap Financial  Federated Premier

Poor diversification

The 3 months correlation between MidCap and Federated is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier and MidCap 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 MidCap Financial Investment are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of MidCap Financial i.e., MidCap Financial and Federated Premier go up and down completely randomly.

Pair Corralation between MidCap Financial and Federated Premier

Given the investment horizon of 90 days MidCap Financial Investment is expected to under-perform the Federated Premier. In addition to that, MidCap Financial is 1.9 times more volatile than Federated Premier Municipal. It trades about -0.01 of its total potential returns per unit of risk. Federated Premier Municipal is currently generating about 0.02 per unit of volatility. If you would invest  1,077  in Federated Premier Municipal on December 29, 2024 and sell it today you would earn a total of  5.00  from holding Federated Premier Municipal or generate 0.46% return on investment over 90 days.

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

MidCap Financial Investment  vs.  Federated Premier Municipal

MidCap Financial Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days MidCap Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, MidCap Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Federated Premier

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Premier Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy primary indicators, Federated Premier is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MidCap Financial and Federated Premier

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

The idea behind MidCap Financial Investment and Federated Premier Municipal 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..