Correlation Between Medallion Financial and Valuence Merger

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

Diversification Opportunities for Medallion Financial and Valuence Merger

-0.45

Correlation Coefficient

Medallion Financial  Valuence Merger

Very good diversification

The 3 months correlation between Medallion and Valuence is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Medallion Financial Corp and Valuence Merger Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valuence Merger Corp 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 Valuence Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valuence Merger Corp has no effect on the direction of Medallion Financial i.e., Medallion Financial and Valuence Merger go up and down completely randomly.

Pair Corralation between Medallion Financial and Valuence Merger

Given the investment horizon of 90 days Medallion Financial Corp is expected to under-perform the Valuence Merger. But the stock apears to be less risky and, when comparing its historical volatility, Medallion Financial Corp is 9.16 times less risky than Valuence Merger. The stock trades about 0.0 of its potential returns per unit of risk. The Valuence Merger Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4.68  in Valuence Merger Corp on December 29, 2024 and sell it today you would earn a total of  0.31  from holding Valuence Merger Corp or generate 6.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	73.77%
Values	Daily Returns

Medallion Financial Corp  vs.  Valuence Merger Corp

Medallion Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medallion Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Medallion Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Valuence Merger Corp

Risk-Adjusted Performance

OK

Over the last 90 days Valuence Merger Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Valuence Merger showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Medallion Financial and Valuence Merger

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

The idea behind Medallion Financial Corp and Valuence Merger Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.