Correlation Between MidCap Financial and Cembra Money

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

Diversification Opportunities for MidCap Financial and Cembra Money

0.77

Correlation Coefficient

MidCap Financial  Cembra Money

Poor diversification

The 3 months correlation between MidCap and Cembra is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Cembra Money Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cembra Money Bank 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 Cembra Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cembra Money Bank has no effect on the direction of MidCap Financial i.e., MidCap Financial and Cembra Money go up and down completely randomly.

Pair Corralation between MidCap Financial and Cembra Money

Assuming the 90 days trading horizon MidCap Financial is expected to generate 2.34 times less return on investment than Cembra Money. But when comparing it to its historical volatility, MidCap Financial Investment is 2.45 times less risky than Cembra Money. It trades about 0.18 of its potential returns per unit of risk. Cembra Money Bank is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7,970  in Cembra Money Bank on April 20, 2025 and sell it today you would earn a total of  3,150  from holding Cembra Money Bank or generate 39.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

MidCap Financial Investment  vs.  Cembra Money Bank

MidCap Financial Inv

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MidCap Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cembra Money Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cembra Money Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cembra Money unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MidCap Financial and Cembra Money

The main advantage of trading using opposite MidCap Financial and Cembra Money positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial position performs unexpectedly, Cembra Money 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 Cembra Money will offset losses from the drop in Cembra Money's long position.

The idea behind MidCap Financial Investment and Cembra Money Bank 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.