Correlation Between MidCap Financial and Stellus Capital

Can any of the company-specific risk be diversified away by investing in both MidCap Financial and Stellus Capital 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 Stellus Capital 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 Stellus Capital Investment, you can compare the effects of market volatilities on MidCap Financial and Stellus Capital 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 Stellus Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and Stellus Capital.

Diversification Opportunities for MidCap Financial and Stellus Capital

0.16

Correlation Coefficient

MidCap Financial  Stellus Capital

Average diversification

The 3 months correlation between MidCap and Stellus is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Stellus Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellus Capital Inve 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 Stellus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellus Capital Inve has no effect on the direction of MidCap Financial i.e., MidCap Financial and Stellus Capital go up and down completely randomly.

Pair Corralation between MidCap Financial and Stellus Capital

Given the investment horizon of 90 days MidCap Financial is expected to generate 2.05 times less return on investment than Stellus Capital. In addition to that, MidCap Financial is 1.15 times more volatile than Stellus Capital Investment. It trades about 0.06 of its total potential returns per unit of risk. Stellus Capital Investment is currently generating about 0.14 per unit of volatility. If you would invest  1,301  in Stellus Capital Investment on September 12, 2024 and sell it today you would earn a total of  83.50  from holding Stellus Capital Investment or generate 6.42% return on investment over 90 days.

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

MidCap Financial Investment  vs.  Stellus Capital Investment

MidCap Financial Inv

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, MidCap Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Stellus Capital Inve

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stellus Capital Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Stellus Capital is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MidCap Financial and Stellus Capital

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

The idea behind MidCap Financial Investment and Stellus Capital 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.