Correlation Between MidCap Financial and Chinook Therapeutics

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Can any of the company-specific risk be diversified away by investing in both MidCap Financial and Chinook Therapeutics 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 Chinook Therapeutics 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 Chinook Therapeutics, you can compare the effects of market volatilities on MidCap Financial and Chinook Therapeutics 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 Chinook Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and Chinook Therapeutics.

Diversification Opportunities for MidCap Financial and Chinook Therapeutics

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between MidCap and Chinook is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Chinook Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinook Therapeutics 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 Chinook Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinook Therapeutics has no effect on the direction of MidCap Financial i.e., MidCap Financial and Chinook Therapeutics go up and down completely randomly.

Pair Corralation between MidCap Financial and Chinook Therapeutics

If you would invest  1,372  in MidCap Financial Investment on February 19, 2024 and sell it today you would earn a total of  180.00  from holding MidCap Financial Investment or generate 13.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy1.56%
ValuesDaily Returns

MidCap Financial Investment  vs.  Chinook Therapeutics

 Performance 
       Timeline  
MidCap Financial Inv 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, MidCap Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.
Chinook Therapeutics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chinook Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chinook Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

MidCap Financial and Chinook Therapeutics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MidCap Financial and Chinook Therapeutics

The main advantage of trading using opposite MidCap Financial and Chinook Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial position performs unexpectedly, Chinook Therapeutics 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 Chinook Therapeutics will offset losses from the drop in Chinook Therapeutics' long position.
The idea behind MidCap Financial Investment and Chinook Therapeutics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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