Correlation Between Apple and MidCap Financial
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and MidCap Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and MidCap Financial Investment, you can compare the effects of market volatilities on Apple 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 Apple with a short position of MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and MidCap Financial.
Diversification Opportunities for Apple and MidCap Financial
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Apple and MidCap is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and MidCap Financial go up and down completely randomly.
Pair Corralation between Apple and MidCap Financial
Assuming the 90 days trading horizon Apple Inc is expected to under-perform the MidCap Financial. In addition to that, Apple is 1.75 times more volatile than MidCap Financial Investment. It trades about -0.09 of its total potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.11 per unit of volatility. If you would invest 1,320 in MidCap Financial Investment on November 3, 2024 and sell it today you would earn a total of 34.00 from holding MidCap Financial Investment or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. MidCap Financial Investment
Performance |
| Timeline |
| Apple Inc |
| MidCap Financial Inv |
Apple and MidCap Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and MidCap Financial
The main advantage of trading using opposite Apple and MidCap Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. ARROW ELECTRONICS | Apple vs. Dairy Farm International | Apple vs. AUST AGRICULTURAL | Apple vs. North American Construction |
| MidCap Financial vs. SIVERS SEMICONDUCTORS AB | MidCap Financial vs. NorAm Drilling AS | MidCap Financial vs. Volkswagen AG | MidCap Financial vs. Darden Restaurants |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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