Correlation Between OFS Capital and Midland States

Can any of the company-specific risk be diversified away by investing in both OFS Capital 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 OFS Capital and Midland States 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 Midland States Bancorp, you can compare the effects of market volatilities on OFS Capital 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 OFS Capital with a short position of Midland States. Check out your portfolio center. Please also check ongoing floating volatility patterns of OFS Capital and Midland States.

Diversification Opportunities for OFS Capital and Midland States

-0.24

Correlation Coefficient

OFS Capital  Midland States

Very good diversification

The 3 months correlation between OFS and Midland is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding OFS Capital 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 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 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 OFS Capital i.e., OFS Capital and Midland States go up and down completely randomly.

Pair Corralation between OFS Capital and Midland States

Considering the 90-day investment horizon OFS Capital is expected to generate 7.82 times less return on investment than Midland States. But when comparing it to its historical volatility, OFS Capital Corp is 1.54 times less risky than Midland States. It trades about 0.03 of its potential returns per unit of risk. Midland States Bancorp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,238  in Midland States Bancorp on September 3, 2024 and sell it today you would earn a total of  447.00  from holding Midland States Bancorp or generate 19.97% return on investment over 90 days.

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

OFS Capital Corp  vs.  Midland States Bancorp

OFS Capital Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in OFS Capital Corp are ranked lower than 2 (%) 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.

Midland States Bancorp

Risk-Adjusted Performance

10 of 100

OK

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 OFS Capital and Midland States

The main advantage of trading using opposite OFS Capital and Midland States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OFS Capital 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 OFS Capital 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.