Correlation Between Medallion Financial and Midland States

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

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

Diversification Opportunities for Medallion Financial and Midland States

0.9

Correlation Coefficient

Medallion Financial  Midland States

Almost no diversification

The 3 months correlation between Medallion and Midland is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Medallion Financial Corp and Midland States Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midland States Bancorp and Medallion 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 Medallion Financial Corp are associated (or correlated) with Midland States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midland States Bancorp has no effect on the direction of Medallion Financial i.e., Medallion Financial and Midland States go up and down completely randomly.

Pair Corralation between Medallion Financial and Midland States

Given the investment horizon of 90 days Medallion Financial Corp is expected to generate 0.65 times more return on investment than Midland States. However, Medallion Financial Corp is 1.53 times less risky than Midland States. It trades about 0.22 of its potential returns per unit of risk. Midland States Bancorp is currently generating about 0.14 per unit of risk. If you would invest  772.00  in Medallion Financial Corp on August 31, 2024 and sell it today you would earn a total of  170.00  from holding Medallion Financial Corp or generate 22.02% return on investment over 90 days.

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

Medallion Financial Corp  vs.  Midland States Bancorp

Medallion Financial Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Financial Corp are ranked lower than 17 (%) 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.

Midland States Bancorp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Midland States Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, Midland States demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medallion Financial and Midland States

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

The idea behind Medallion Financial Corp and Midland States Bancorp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.