Correlation Between Sono Tek and MidCap Financial
Can any of the company-specific risk be diversified away by investing in both Sono Tek 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 Sono Tek and MidCap Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sono Tek Corp and MidCap Financial Investment, you can compare the effects of market volatilities on Sono Tek 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 Sono Tek with a short position of MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sono Tek and MidCap Financial.
Diversification Opportunities for Sono Tek and MidCap Financial
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sono and MidCap is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp 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 Sono Tek 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 Sono Tek Corp 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 Sono Tek i.e., Sono Tek and MidCap Financial go up and down completely randomly.
Pair Corralation between Sono Tek and MidCap Financial
Given the investment horizon of 90 days Sono Tek Corp is expected to generate 1.97 times more return on investment than MidCap Financial. However, Sono Tek is 1.97 times more volatile than MidCap Financial Investment. It trades about 0.12 of its potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.17 per unit of risk. If you would invest 447.00 in Sono Tek Corp on August 29, 2024 and sell it today you would earn a total of 22.00 from holding Sono Tek Corp or generate 4.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sono Tek Corp vs. MidCap Financial Investment
Performance |
| Timeline |
| Sono Tek Corp |
| MidCap Financial Inv |
Sono Tek and MidCap Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sono Tek and MidCap Financial
The main advantage of trading using opposite Sono Tek and MidCap Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sono Tek 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.| Sono Tek vs. Novanta | Sono Tek vs. ESCO Technologies | Sono Tek vs. Vontier Corp | Sono Tek vs. Sensata Technologies Holding |
| MidCap Financial vs. WhiteHorse Finance | MidCap Financial vs. Monroe Capital Corp | MidCap Financial vs. Portman Ridge Finance | MidCap Financial vs. Fidus Investment Corp |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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