Correlation Between OFS Capital and MidWestOne Financial

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

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

Diversification Opportunities for OFS Capital and MidWestOne Financial

0.01

Correlation Coefficient

OFS Capital  MidWestOne Financial

Significant diversification

The 3 months correlation between OFS and MidWestOne is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding OFS Capital Corp and MidWestOne Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidWestOne Financial and OFS Capital 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 OFS Capital Corp are associated (or correlated) with MidWestOne Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidWestOne Financial has no effect on the direction of OFS Capital i.e., OFS Capital and MidWestOne Financial go up and down completely randomly.

Pair Corralation between OFS Capital and MidWestOne Financial

Considering the 90-day investment horizon OFS Capital Corp is expected to generate 0.73 times more return on investment than MidWestOne Financial. However, OFS Capital Corp is 1.38 times less risky than MidWestOne Financial. It trades about 0.07 of its potential returns per unit of risk. MidWestOne Financial Group is currently generating about -0.07 per unit of risk. If you would invest  796.00  in OFS Capital Corp on December 1, 2024 and sell it today you would earn a total of  34.00  from holding OFS Capital Corp or generate 4.27% return on investment over 90 days.

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

OFS Capital Corp  vs.  MidWestOne Financial Group

OFS Capital Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OFS Capital Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, OFS Capital is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with OFS Capital and MidWestOne Financial

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

The idea behind OFS Capital Corp and MidWestOne Financial Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.