Correlation Between Mesirow Financial and Mesirow Enhanced

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

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

Diversification Opportunities for Mesirow Financial and Mesirow Enhanced

-0.46

Correlation Coefficient

Mesirow Financial  Mesirow Enhanced

Very good diversification

The 3 months correlation between Mesirow and Mesirow is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial Small and Mesirow Enhanced Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesirow Enhanced Core and Mesirow 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 Mesirow Financial Small are associated (or correlated) with Mesirow Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesirow Enhanced Core has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and Mesirow Enhanced go up and down completely randomly.

Pair Corralation between Mesirow Financial and Mesirow Enhanced

Assuming the 90 days horizon Mesirow Financial Small is expected to generate 4.1 times more return on investment than Mesirow Enhanced. However, Mesirow Financial is 4.1 times more volatile than Mesirow Enhanced Core. It trades about 0.21 of its potential returns per unit of risk. Mesirow Enhanced Core is currently generating about 0.22 per unit of risk. If you would invest  1,364  in Mesirow Financial Small on September 4, 2024 and sell it today you would earn a total of  77.00  from holding Mesirow Financial Small or generate 5.65% return on investment over 90 days.

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

Mesirow Financial Small  vs.  Mesirow Enhanced Core

Mesirow Financial Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mesirow Financial Small are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mesirow Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mesirow Enhanced Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mesirow Enhanced Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mesirow Enhanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mesirow Financial and Mesirow Enhanced

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

The idea behind Mesirow Financial Small and Mesirow Enhanced Core 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..