Correlation Between MidCap Financial and Sono Tek
Can any of the company-specific risk be diversified away by investing in both MidCap Financial and Sono Tek 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 Sono Tek 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 Sono Tek Corp, you can compare the effects of market volatilities on MidCap Financial and Sono Tek 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 Sono Tek. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and Sono Tek.
Diversification Opportunities for MidCap Financial and Sono Tek
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MidCap and Sono is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Sono Tek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sono Tek Corp 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 Sono Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sono Tek Corp has no effect on the direction of MidCap Financial i.e., MidCap Financial and Sono Tek go up and down completely randomly.
Pair Corralation between MidCap Financial and Sono Tek
Given the investment horizon of 90 days MidCap Financial is expected to generate 1.86 times less return on investment than Sono Tek. But when comparing it to its historical volatility, MidCap Financial Investment is 1.83 times less risky than Sono Tek. It trades about 0.3 of its potential returns per unit of risk. Sono Tek Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 426.00 in Sono Tek Corp on September 1, 2024 and sell it today you would earn a total of 48.00 from holding Sono Tek Corp or generate 11.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MidCap Financial Investment vs. Sono Tek Corp
Performance |
| Timeline |
| MidCap Financial Inv |
| Sono Tek Corp |
MidCap Financial and Sono Tek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MidCap Financial and Sono Tek
The main advantage of trading using opposite MidCap Financial and Sono Tek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial position performs unexpectedly, Sono Tek 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 Sono Tek will offset losses from the drop in Sono Tek's long position.| MidCap Financial vs. Visa Class A | MidCap Financial vs. Diamond Hill Investment | MidCap Financial vs. Distoken Acquisition | MidCap Financial vs. Associated Capital Group |
| Sono Tek vs. Novanta | Sono Tek vs. ESCO Technologies | Sono Tek vs. Vontier Corp | Sono Tek vs. Sensata Technologies Holding |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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