Correlation Between MidCap Financial and WhiteHorse Finance

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

Diversification Opportunities for MidCap Financial and WhiteHorse Finance

-0.71

Correlation Coefficient

MidCap Financial  WhiteHorse Finance

Pay attention - limited upside

The 3 months correlation between MidCap and WhiteHorse is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and WhiteHorse Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WhiteHorse Finance 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 WhiteHorse Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WhiteHorse Finance has no effect on the direction of MidCap Financial i.e., MidCap Financial and WhiteHorse Finance go up and down completely randomly.

Pair Corralation between MidCap Financial and WhiteHorse Finance

Given the investment horizon of 90 days MidCap Financial Investment is expected to generate 0.65 times more return on investment than WhiteHorse Finance. However, MidCap Financial Investment is 1.53 times less risky than WhiteHorse Finance. It trades about 0.43 of its potential returns per unit of risk. WhiteHorse Finance is currently generating about -0.35 per unit of risk. If you would invest  1,314  in MidCap Financial Investment on September 5, 2024 and sell it today you would earn a total of  105.00  from holding MidCap Financial Investment or generate 7.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

MidCap Financial Investment  vs.  WhiteHorse Finance

MidCap Financial Inv

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 7 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

WhiteHorse Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WhiteHorse Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with MidCap Financial and WhiteHorse Finance

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

The idea behind MidCap Financial Investment and WhiteHorse Finance 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.