Correlation Between MidCap Financial and JAPAN AIRLINES
Can any of the company-specific risk be diversified away by investing in both MidCap Financial and JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES, you can compare the effects of market volatilities on MidCap Financial and JAPAN AIRLINES 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 JAPAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and JAPAN AIRLINES.
Diversification Opportunities for MidCap Financial and JAPAN AIRLINES
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MidCap and JAPAN is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES 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 JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of MidCap Financial i.e., MidCap Financial and JAPAN AIRLINES go up and down completely randomly.
Pair Corralation between MidCap Financial and JAPAN AIRLINES
Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 1.09 times more return on investment than JAPAN AIRLINES. However, MidCap Financial is 1.09 times more volatile than JAPAN AIRLINES. It trades about -0.04 of its potential returns per unit of risk. JAPAN AIRLINES is currently generating about -0.41 per unit of risk. If you would invest 1,287 in MidCap Financial Investment on October 11, 2024 and sell it today you would lose (10.00) from holding MidCap Financial Investment or give up 0.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MidCap Financial Investment vs. JAPAN AIRLINES
Performance |
| Timeline |
| MidCap Financial Inv |
| JAPAN AIRLINES |
MidCap Financial and JAPAN AIRLINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MidCap Financial and JAPAN AIRLINES
The main advantage of trading using opposite MidCap Financial and JAPAN AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial position performs unexpectedly, JAPAN AIRLINES 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 JAPAN AIRLINES will offset losses from the drop in JAPAN AIRLINES's long position.| MidCap Financial vs. Southwest Airlines Co | MidCap Financial vs. Singapore Airlines Limited | MidCap Financial vs. GRENKELEASING Dusseldorf | MidCap Financial vs. JAPAN AIRLINES |
| JAPAN AIRLINES vs. National Beverage Corp | JAPAN AIRLINES vs. INDOFOOD AGRI RES | JAPAN AIRLINES vs. GRIFFIN MINING LTD | JAPAN AIRLINES vs. VIVA WINE GROUP |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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