Correlation Between DMY Squared and Medallion Financial

Can any of the company-specific risk be diversified away by investing in both DMY Squared and Medallion 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 DMY Squared and Medallion Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between dMY Squared Technology and Medallion Financial Corp, you can compare the effects of market volatilities on DMY Squared and Medallion 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 DMY Squared with a short position of Medallion Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of DMY Squared and Medallion Financial.

Diversification Opportunities for DMY Squared and Medallion Financial

0.6

Correlation Coefficient

DMY Squared  Medallion Financial

Poor diversification

The 3 months correlation between DMY and Medallion is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding dMY Squared Technology and Medallion Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Financial Corp and DMY Squared 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 dMY Squared Technology are associated (or correlated) with Medallion Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Financial Corp has no effect on the direction of DMY Squared i.e., DMY Squared and Medallion Financial go up and down completely randomly.

Pair Corralation between DMY Squared and Medallion Financial

Given the investment horizon of 90 days dMY Squared Technology is expected to generate 2.34 times more return on investment than Medallion Financial. However, DMY Squared is 2.34 times more volatile than Medallion Financial Corp. It trades about 0.25 of its potential returns per unit of risk. Medallion Financial Corp is currently generating about 0.2 per unit of risk. If you would invest  1,120  in dMY Squared Technology on February 16, 2025 and sell it today you would earn a total of  192.00  from holding dMY Squared Technology or generate 17.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

dMY Squared Technology  vs.  Medallion Financial Corp

dMY Squared Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in dMY Squared Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, DMY Squared showed solid returns over the last few months and may actually be approaching a breakup point.

Medallion Financial Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Medallion Financial may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with DMY Squared and Medallion Financial

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

The idea behind dMY Squared Technology and Medallion Financial Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.