Correlation Between Solowin Holdings and MidCap Financial

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

By analyzing existing cross correlation between Solowin Holdings Ordinary and MidCap Financial Investment, you can compare the effects of market volatilities on Solowin Holdings and MidCap 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 Solowin Holdings with a short position of MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solowin Holdings and MidCap Financial.

Diversification Opportunities for Solowin Holdings and MidCap Financial

-0.56

Correlation Coefficient

Solowin Holdings  MidCap Financial

Excellent diversification

The 3 months correlation between Solowin and MidCap is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Solowin Holdings Ordinary and MidCap Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidCap Financial Inv and Solowin Holdings 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 Solowin Holdings Ordinary are associated (or correlated) with MidCap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidCap Financial Inv has no effect on the direction of Solowin Holdings i.e., Solowin Holdings and MidCap Financial go up and down completely randomly.

Pair Corralation between Solowin Holdings and MidCap Financial

Given the investment horizon of 90 days Solowin Holdings Ordinary is expected to generate 7.16 times more return on investment than MidCap Financial. However, Solowin Holdings is 7.16 times more volatile than MidCap Financial Investment. It trades about 0.03 of its potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.1 per unit of risk. If you would invest  254.00  in Solowin Holdings Ordinary on September 3, 2024 and sell it today you would earn a total of  3.00  from holding Solowin Holdings Ordinary or generate 1.18% return on investment over 90 days.

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

Solowin Holdings Ordinary  vs.  MidCap Financial Investment

Solowin Holdings Ordinary

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solowin Holdings Ordinary are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Solowin Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MidCap Financial Inv

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, MidCap Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Solowin Holdings and MidCap Financial

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

The idea behind Solowin Holdings Ordinary and MidCap Financial Investment 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 Transaction History module to view history of all your transactions and understand their impact on performance.