Correlation Between MidCap Financial and Heidelberg Materials
Can any of the company-specific risk be diversified away by investing in both MidCap Financial and Heidelberg Materials 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 MidCap Financial and Heidelberg Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MidCap Financial Investment and Heidelberg Materials AG, you can compare the effects of market volatilities on MidCap Financial and Heidelberg Materials 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 MidCap Financial with a short position of Heidelberg Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and Heidelberg Materials.
Diversification Opportunities for MidCap Financial and Heidelberg Materials
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MidCap and Heidelberg is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials and MidCap 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 MidCap Financial Investment are associated (or correlated) with Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of MidCap Financial i.e., MidCap Financial and Heidelberg Materials go up and down completely randomly.
Pair Corralation between MidCap Financial and Heidelberg Materials
Assuming the 90 days trading horizon MidCap Financial is expected to generate 5.58 times less return on investment than Heidelberg Materials. But when comparing it to its historical volatility, MidCap Financial Investment is 1.51 times less risky than Heidelberg Materials. It trades about 0.1 of its potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 12,020 in Heidelberg Materials AG on November 4, 2024 and sell it today you would earn a total of 1,630 from holding Heidelberg Materials AG or generate 13.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
MidCap Financial Investment vs. Heidelberg Materials AG
Performance |
| Timeline |
| MidCap Financial Inv |
| Heidelberg Materials |
MidCap Financial and Heidelberg Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MidCap Financial and Heidelberg Materials
The main advantage of trading using opposite MidCap Financial and Heidelberg Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial position performs unexpectedly, Heidelberg Materials 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 Heidelberg Materials will offset losses from the drop in Heidelberg Materials' long position.| MidCap Financial vs. SILICON LABORATOR | MidCap Financial vs. Japan Medical Dynamic | MidCap Financial vs. TRI CHEMICAL LABORATINC | MidCap Financial vs. Eastman Chemical |
| Heidelberg Materials vs. Flutter Entertainment PLC | Heidelberg Materials vs. PARKEN Sport Entertainment | Heidelberg Materials vs. MCEWEN MINING INC | Heidelberg Materials vs. Universal Entertainment |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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