Correlation Between MidCap Financial and Graham Holdings

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

Diversification Opportunities for MidCap Financial and Graham Holdings

0.09

Correlation Coefficient

MidCap Financial  Graham Holdings

Significant diversification

The 3 months correlation between MidCap and Graham is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Graham Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graham Holdings 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 Graham Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graham Holdings has no effect on the direction of MidCap Financial i.e., MidCap Financial and Graham Holdings go up and down completely randomly.

Pair Corralation between MidCap Financial and Graham Holdings

Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 1.0 times more return on investment than Graham Holdings. However, MidCap Financial is 1.0 times more volatile than Graham Holdings Co. It trades about 0.13 of its potential returns per unit of risk. Graham Holdings Co is currently generating about -0.04 per unit of risk. If you would invest  1,001  in MidCap Financial Investment on April 23, 2025 and sell it today you would earn a total of  119.00  from holding MidCap Financial Investment or generate 11.89% return on investment over 90 days.

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

MidCap Financial Investment  vs.  Graham Holdings Co

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 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, MidCap Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Graham Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Graham Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Graham Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MidCap Financial and Graham Holdings

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

The idea behind MidCap Financial Investment and Graham Holdings Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.