Correlation Between MidWestOne Financial and Medallion Financial

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

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

Diversification Opportunities for MidWestOne Financial and Medallion Financial

0.13

Correlation Coefficient

MidWestOne Financial  Medallion Financial

Average diversification

The 3 months correlation between MidWestOne and Medallion is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding MidWestOne Financial Group and Medallion Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Financial Corp and MidWestOne 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 MidWestOne Financial Group are associated (or correlated) with Medallion Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Financial Corp has no effect on the direction of MidWestOne Financial i.e., MidWestOne Financial and Medallion Financial go up and down completely randomly.

Pair Corralation between MidWestOne Financial and Medallion Financial

Given the investment horizon of 90 days MidWestOne Financial Group is expected to generate 0.74 times more return on investment than Medallion Financial. However, MidWestOne Financial Group is 1.36 times less risky than Medallion Financial. It trades about -0.07 of its potential returns per unit of risk. Medallion Financial Corp is currently generating about -0.1 per unit of risk. If you would invest  3,271  in MidWestOne Financial Group on November 29, 2024 and sell it today you would lose (240.00) from holding MidWestOne Financial Group or give up 7.34% of portfolio value over 90 days.

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

MidWestOne Financial Group  vs.  Medallion Financial Corp

MidWestOne Financial

Risk-Adjusted Performance

Very Weak

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

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 inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with MidWestOne Financial and Medallion Financial

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

The idea behind MidWestOne Financial Group and Medallion Financial 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.